HB 171 
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EXERCISES IN 



CURRENT ECONOMICS 



HAMILTON 



THE UNIVERSITY OF CHICAGO PRESS 



MATERIALS FOR THE STUDY 
OF ECONOMICS 



SEP 30 |9!6 



EXERCISES IN CURRENT ECONOMICS 



THE UNIVERSITY OP CHICAGO PRESS 
CHICAGO, ILLINOIS 



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EXERCISES IN 
CURRENT ECONOMICS 



By 

WALTON HALE HAMILTON 




THE UNIVERSITY OF CHICAGO PRESS 
CHICAGO, ILLINOIS 



Copyright 1916 By 
The University of Chicago 



All Rights Reserved 



Published September 1916 



/ 



Composed and Printed By 

The University of Chicago Press 

Chicaso, Illinois, U.S.A. 

SEP 30 1916 

i>CI.A437922 



HE>ni 

■5' 



PREFACE 

This book of exercises has been prepared to accompany the 
author's Current Economic Problems. As complementary expressions 
of the same conception of economics and the same method of teach- 
ing, unity and completeness are to be found only in the two volumes 
together. 

The Exercises follows the Problems, division by division, and 
section by section. In this volume each of the sections falls into four 
part*. The first gives a short statement introductory to the topic 
announced. These statements supplement the introductions to the 
divisions in the Problems, and are intended to give to the divisions 
the unity which the introductions to the divisions attempt to give 
to the treatment as a whole. The second gives, by number, a list 
of supplementary readings in the Problems. These are intended to 
show something of the many cross-currents in economic life and to 
indicate the intimate connection between seemingly independent 
problems. Since the sections bear the same titles as those in the 
Problems, it has seemed superfluous to enumerate the required read- 
ings. The third gives a list of questions based directly upon the 
readings. An attempt has been made to word them in such a way 
that they do not call for mere reproduction; that in answering them 
the student is forced to give something of his own. The fourth pre- 
sents a series of problems based indirectly upon the readings. They 
are intended to test the student's acquisition of something more than 
the mere language of economics, his assimilation of readings present- 
ing material from divergent viewpoints, and his ability to orient his 
thought in the face of conflicting opinions and testimony. These 
problems form the real test of the student's reading and study. 

The character of the Problems has, of course, been determined 
by the theory underlying the two books. There are fewer problems 
calling for the mere accumulation of evidence and the annihilation 
of fallacies than usyal. There are more whose objects are the clear 
statement of the real issues in the problems discussed, the logical 



viii PREFACE 

implications of viewpoints and programs, and the correlation of 
problems. This accounts for the prevalence of direct quotations 
followed by the monotonous injunction of "illustrate," "develop," 
"criticize," and "appraise." Above all, the idea in selection has 
been to introduce the student to "current economic problems," not 
to particular problems. 

How much of the book is new, who can say? The author is 
under serious obligations to the authors of several books of problems 
for many of the exercises in this volume. But, since hardly one was 
used without more or less change in form to adapt it to the particular 
purpose, it seems unfair to charge the original authors with full 
responsibility. Further, the customary designation of indebtedness 
by initial fails to convey the full measure of the obligations which 
the author is under to those who have compiled books of problems, 
either for personal or for general use. The general influence of these 
books in determining the character and contents of the present 
volume has been so great that indebtedness for specific problems is 
small by comparison. 

After long debate the author has concluded to exclude bibliog- 
raphies from this volume. Exhaustive bibliographies require too 
much space and are almost worthless in an introductory course. 
Selected bibliographies, meeting the needs of the author, would 
probably fail to satisfy anyone else who is using the book. The 
instructor, from the materials which are at hand, will find no trouble 
in being able to find suitable supplementary reading. For the author 
to undertake to make the selection for the instructor would rob the 
latter of the intellectual liberty to give his own course, which it is 
one of the objects of this method to effect. 

W. H. H. 

Amherst College 
May 8, 1916 



/ 



CONTENTS 

PAGE 

Introductory i 

1 . The Nature of Current Economic Problems .... i 

I. The Antecedents of Modern Industrialism .... 4 

2. Ideals Underlying Industrial Development 4 

3. Manorial and Gild Economy 5 

4. Mediaeval Commerce 6 

5. Mediaeval Industrial Policy 7 

6. Mediaeval Economic Theory 8 

II. The Industrial Revolution 10 

7. The Antecedents of the Revolution 10 

8. The Nature and Scope of the Revolution 11 

9. Labor and the Revolution 12 

10. The New Industrialism 13 

11. The Extension of Industrialism 13 

III. Social Control m Modern Industrialism 15 

12. The Nature of Progress iS 

13. The Control of Economic Activity 16 

14. The Statement of the Laissez-faire Theory 17 

15. The Interpretation of Laissez-faire 18 

16. The Protest against Individualism 19 

17. The Theory and Program of Social Control .... 20 

18. Conservative Factors in Development of Social Control . 21 

19. The Basis of National Efficiency 22 

IV. The Pecuniary Basis op Economic Organization ... 23 

20. Price as an Organizing Force 23 

21. Pecuniary Competition 23 

22. Price-Fixing by Authority 25 

23. The Fvmction of Middlemen 25 

24. Speculation 26 

25. The Corporation 28 

ix 



X CONTENTS 

PAGE 

V. Problems of the Business Cycle 30 

26. The Delicate Mechanism of Industry 30 

27. The Economic Cycle 31 

28. The Antecendents of Crises 31 

29. The Course of a Crisis ,32 

30. Financial and Industrial Conditions during a Crisis . . 33 

31. Industrial Conditions during a Depression 33 

32. Typical Theories of Crises 34 

33. Credit and Crises 35 

34. Control of the Industrial Cycle ......... 36 

VI. Problems of International Trade 38 

35. The Basis of International Trade 38 

36. The Mechanism of International Trade 39 

37. The Demand for Local Protection 40 

38. The Perennial Argument for Protection ...... 41 

39. The Case for Protection 41 

40. The Influence of the Tariff on Wages 43 

41. The Historical Setting of the Current Tariff Problem . . 44 

42. The Argument from Experience 45 

43. The Impracticable Nature of Protection 46 

44. The Scientific Revision of the Tariff . 47 

VII. The Problem of Railway Regulation ...... 48 

45. The Fundamental Factors in the Problem 48 

46. Discriminatory Practices of the Railroads 49 

47. The Nature and Extent of Regulation ...... 50 

48. Aspects of Rate-Making 51 

49. Valuation of the Railroads . . 51 

50. Government Ownership of Railroads 53 

VIII. The Problem op Capitalistic Monopoly ...... 55 

51. Is Monopoly Inevitable ? 55 

52. Conditions of Monopolization 56 

53. The Influence of Monopoly on Price 57 

54. Types of Unfair Competition 58 

55. The Government and Monopoly 59 

56. The Social Problem of Monopoly 59 



CONTENTS xi 

PAGE 

IX. The Problems of Population ^i 

57. The Question of Numbers 61 

58. The Malthusian Theory 62 

59. The Coming of the Immigrant 63 

60. Immigration and Industrial Development 64 

61. Immigration and Labor Conditions 65 

62. The Further Restriction of Immigration 66 

63. Immigration and Our Future 67 

64. The Quality of Population 68 

X. The Problems of Economic Insecurity 70 

65. Insecurity under Modern Industrialism 70 

66. Unemployment 71 

67. Industrial Accident 72 

68. Sickness and Old Age 73 

69. The Standard of Living 74 

70. The Minimum Wage 74 

71. Compulsory Arbitration and Wages 76 

XI. The Problems of Trade Unionism 77 

72. Group and Class Consciousness 77 

73. The Viewpoints of Laborer and Capitalist 78 

74. Character and Purposes of Trade Unions 79 

75. The Theory of Unionism 80 

76. The Weapons of Industrial Conflict 81 

77. Scientific Management and Unionism 82 

78. Unionism and the Anti-Trust Laws . 83 

79. Revolutionary Unionism 8s 

XII. Social Reform and Legal Institutions 85 

80. The Legal System 85 

81. Private Property 86 

82. Industrial Liberty 87 

83. The Courts and Labor 88 

XIII. Social Reform and Taxation 90 

84. Taxation and Industrial Development 90 

85. The Theory of Taxation 9^ 



xii CONTENTS 

PAGE 

86. The Incidence of Taxation 91 

87. "Unscientific" Taxation 92 

88. Tendencies in Taxation 93 

89. The Single Tax 94 

XIV. Comprehensive Schemes of Social Reform . . . .96 

90. The Voice of Social Protest 96 

91. Individualistic Schemes of Reform 96 

92. The Socialist's Indictment of Capitalism 97 

93. The Case for Socialism 98 

94. Socialist Arguments for the Masses 99 

95. Socialist Programs 100 

96. The Case against Socialism loi 

97. Social Panaceas 102 

98. Economics and the Future of Society . . v . . . . 103 



INTRODUCTORY 

Note. — In each of the sections of this book the following symbols are 
employed: A, for the introduction to the section; B, for references to 
other readings bearing indirectly upon the assignment; C, for questions 
based directly upon the readings; and D, for problems based only indi- 
rectly upon the readings. Under B the references are to the readings in 
the Problems by number, not by page. 

I. The Nature of Current Economic Problems 

A. Economics, like every other science, attempts to answer a 
fundamental question and to raise a fundamental problem. Its 
question is, Why are all of us as well off, or as bad off, as we are; 
and why are some of us better off, or if you please worse off, than 
others ?' Its problem is. How can we as a community become better 
off, or escape becoming worse off, than we are at present? This, 
quite likely, involves the probability of some of us becoming better 
off, or worse off, than we are at present, at the expense of others. 
Into this large problem the miniature problems of our world, which 
we study. and attempt to solve, all resolve themselves. Before 
studying particular problems we should attempt to find out what 
an economic problem is like. 

B. Current Economic Problems, pp. xxvii-xxxii. Make a rapid 
survey of the table of contents of the volume, pp. xi-xxvi. 

C. D. I. Make a list of the more important questions of the day. 
Which of these are exclusi\^ely economic ? Which are primarily eco- 
nomic? Which, primarily non-economic, have economic aspects? 
Which are non-economic ? 

2. How long has each of the following problems confronted 
society: rich man and poor man? employer and employee? the 
ratio of population to industrial equipment? competition and 
monopoly? industrial crises? unemployment? elasticity in cur- 
rency? the regulation of railway rates? the valuation of public- 
service utilities? Show the beginnings of any of these problems. 
What of the end ? Use your knowledge of any of these to illustrate the 
statement, "Economic problems are in process of gradual solution." 

3. Make a list of a dozen problems which were of moment ten or, 
better still, twenty or thirty years ago. What has become of each 

' Edwin Cannan, Wealth, v. 



2 CURRENT ECONOMIC PROBLEMS 

of them? What are the various ways in which they have been 
disposed of ? How, after all, do economic problems get solved ? 

4. In the "solution" of these problems what agencies of social 
control were used ? Was an effort made to secure immediate results, 
or was society content to secure a gradual 'improvement" in con- 
ditions? Did the attempt at solution secure the result at which it 
aimed, or did the entrance of new and unexpected factors give an 
unlooked-for result ? Was attention directed to the real problem or 
only to a superficial aspect of it ? 

5. Did the existence of these problems in the past imply the 
existence of great "evils" ? Did their "solution" eliminate the evils 
or only change their form ? Were they attended by the appearance 
of any new and unexpected evils ? 

6. Can we hope in time to rid ourselves of all economic ill? 
Can the fundamental economic problem mentioned in the introduc- 
tion to this lesson eventually reach a solution ? 

7. Can an economic problem, say that of capitalistic monopoly, 
be studied and solved in isolation ? Has it any connection with the 
problem of protection or free trade ? crises and depressions ? railway 
regulation? the "money trust" ? trade unionism? immigration? 
the relation of the state to industry? socialism? 

8. State two alternative solutions of the current problem with 
which you are best acquainted. Make a list of the probable conse- 
quences which would attend each solution. Are your consequences 
all economic ? If not, what kinds of non-economic consequences are 
involved ? Do you find all the "good" consequences on one side and 
all the "bad" on the other? How are the good and bad economic 
consequences to be measured against each other? How are eco- 
nomic consequences to be measured against political, social, ethical, 
and religious consequences ? How is a judgment between these pos- 
sible solutions to be made? Does your solution dispose of the 
problem in its entirety, or only of a current aspect of it ? 

9. Are the problems of rich and poor, and of employer and 
employee, just what they have always been ? Were these problems 
of five hundred, one hundred, or twenty years ago just what they 
are today? Is their nature affected by our modern social arrange- 
ments, such as the modern state, property, and contract ? Are they 
affected by our economic institutions, such as competition, division 
of labor, and international trade? Do our peculiar "social evalua- 
tions" of classes, institutions, and activities have anything to do 
with them? 

10. Our approach to the end of the "exploitative" period is 
bringing about what changes in our attitude toward economic classes, 
institutions, and activities? It is bringing what new prol^lems to 



INTRODUCTORY , 3 

the front? Are these problems new, or only new to us? Can we 
state them quite accurately in terms used before or elsewhere ? 

11. "Economic problems are aspects of social development. 
Their solution is to be found in the direction of the growth of social 
life and institutions." By concrete examples illustrate how economic 
problems are to be studied as phases of a general developing move- 
ment. How does this method of treatment differ from that of studying 
them in severalty? From this viewpoint show the necessity of a 
general historical setting for the problems. 

12. Show that each of the problems mentioned in this exercise 
is involved in the fundamental problem of economics as stated in the 
introduction to this lesson. State that problem in terms of its general 
historical setting. 

13. Draw up in an orderly form the conclusions you have 
reached as to the nature of current economic problems. 



I. THE ANTECEDENTS OF MODERN INDUSTRIALISM 
2. Ideals Underlying Industrial Development 

A. Our economic problems have their being, not only as part of a 
particular industrial system, but as part of a peculiar culture. They 
are rooted in our vast complex of businesses, markets, machines, and 
industrial functionaries; but their life comes from the world of ideas 
in which they thrive. About the whole material Hfe and activities 
there lies a scheme of values, standards, attitudes, and habits of 
thought which give to the Western world a spirit and purpose all its 
own. Out of a past, reaching into the vague unknown, this scheme 
of values has been developed. It gives character to our system, 
determines the nature of its problems, and in myriad subtle ways 
conditions their solution. To understand our problems aright we 
must enter this strange world of values and ideas. 

C. I. Why should an account of the peculiar characteristics of 
modem industrialism be presented at the beginning of a sketch of 
economic development? 2. What bearing has each of the five 
characteristics of modern industrialism mentioned in i upon the 
nature of economic problems? 3. Show the devious ways in which 
the Christian teachings mentioned in 2 imparted to our social system 
the characteristics mentioned in i. 

D. I. "After the fall of Rome society fell apart into a large 
number of small groups. The universal society, which had found 
expression in the Roman Empire, remained only as an ideal." How 
was the ideal of a universal society kept alive during the Middle 
Ages ? Why was the ideal not lost when the Holy Catholic Church 
ceased to be a potent force in Western Europe ? 

2. "The centralization of Christendom in the papacy, the tithes 
collected by the church, the system of penance which it imposed, 
the pilgrimages it encouraged, the use of relics by good Christians, 
and the building of vast cathedrals, all these contributed something 
to the development of modern industrialism." Can you establish 
these connections ? 

3. Show the part played in the development of modern indus- 
trialism by the extreme dignity attached to human life, material 
means to well-being, and manual labor. 

4. "Western society looks toward the future." Give several 
concrete illustrations. Point out the importance of this statement. 



ANTECEDENTS OF MODERN INDUSTRIALISM 5 

5. Make a list of the social values, or appraisals, of greatest 
importance which this lesson has suggested to you. Show how they 
"give character to our system, determine the nature of its problems, 
and condition their solution." 

3. Manorial and Gild Economy 

A. Manorial and gild economy have for us a double importance. 
First, they belong to industrial societies differing from ours in tech- 
nique, in organization, in class structure, and in the nature of their 
problems. The contrast should help us to a better appreciation of 
our problems and their peculiar dependence upon their historical 
setting. Secondly, they made their contributions to the development 
of the industrial society in which we live. In them we see the begin- 
nings of an agricultural system, a market, a pecuniary valuation, and 
an industrial order. We note the tendency of the last to expansion, 
and the appearance of incipient industrial classes. 

C. I. Compare the property rights of the lord of the manor 
with those of the capitalist-employer of today. 2. Compare the posi- 
tion of the villein with that of the agricultural laborer of today; 
with that of the industrial laborer of today. 3. What is meant by 
the " self-sufhciency " of the manor? What has brought about the 
passing of self-sufficient communities ? 4. Illustrate Biicher's con- 
clusions upon "itinerancy" and "home-work" with American ex- 
amples. 5. What gild practices seem to you most peculiar ? 6. What 
part was played by the gild in industrial development ? 7. Show the 
transitional nature of the preamble of the gild of the tailors at Exeter. 

D. I. "The manorial system was an aggregation of like units; 
modern industrialism is an integration of a multitude of unlike units 
into a vast and intricate system." Illustrate. This difference in 
organization is responsible for what differences in the nature of the 
problems confronting the two societies ? 

2. Why were financial panics, commercial crises, and industrial 
depressions unknown in mediaeval Europe? What was the nature 
of economic disasters which mediaeval peoples had to fear ? 

3. "The relation of mediaeval lord and man was a matter of 
status; that of modern employer and employee is an affair of con- 
tract." Compare the advantages and disadvantages of the positions 
of the mediaeval and the modern proletarian. Did the serf or villein 
own any equities in the property with which he worked ? Compare 
the problems of economic insecurity in the two systems. 

4. "The production of an agricultural surplus is a necessary 
prerequisite to a differentiated industrial system." "The size of the 
agricultural surplus fixes the limit of urban growth." On the basis 



6 CURRENT ECONOMIC PROBLEMS 

of these and like statements write an essay upon the part played by 
the agricultural surplus in the development of modern industrialism. 

5. What advantages in industrial eflficiency had the mediaeval 
system of serfdom over the Roman system of slavery ? Did serfdom 
make any positive contribution to the agricultural surplus ? 

6. "The monastery, an aggregation of mature males, possessed 
no purely consumptive class. Labor was evoked for the sake of 
discipline. In course of time the monks became very fond of the 
good things of life." With these sentences as a basis, show how the 
monastery contributed to the production of an agricultural surplus 
and the- beginnings of a commercial system. 

7. "The essential difference between the village and the town is 
that the village is a collection of homogeneous units, while the town 
is a collection of heterogeneous units differentiated and integrated." 
Translate and illustrate. 

8. Compare the market for which goods were produced by the 
gildsmen with that wliich modern entrepreneurs have to consider. 
What differences do you note in the two "business" problems 
involved ? 

9. "To use modern terms, which were meaningless then, the 
gildsman was at once employer and workman, capitalist and laborer." 
Compare the " labor problems " of gild and modern industrial economy. 
Could labor unions have grown up in the mediaeval town ? Could 
socialism have arisen ? syndicalism ? 

ID. What contribution did gild economy make to a development 
of each of the following : the market ? the pecuniary system ? the 
enlargement of the industrial community ? modern industrial organi- 
zation ? modern technique ? modern industrial classes ? 

4. Mediaeval Commerce 

A. Through commerce the aggregation of small and self-sufficient 
communities, which were the mediaeval world, has given place to the 
complex system of interdependent groups, which we call modern indus- 
trialism. The new organization has tended, not only to the creation 
of a universal industrial system, but to a world-wide society and a 
cosmopolitan culture as well. It has left its imprint upon, all our 
institutions, political, economic, ethical, religious, and social. It has 
translated all our problems into terms of the larger social group. 
It has made the fact of interdependence of paramount importance 
in the consideration of our social arrangements. 

C. I. Why are no readings given in the Problems recording actual 
mediaeval exchanges ? 2. In what respects do the histories of com- 
merce with which yoii are acquainted fail to meet Forrest's definition ? 



ANTECEDENTS OF MODERN INDUSTRIALISM 7 

3. Connect the attitude of the early church toward commerce with 
its fundamental concept of value. 4. Did the commercial activities 
of the church establish permanent commercial relations? 5. Did 
they tend to estabhsh habits of thought and practices favorable to 
commercial development? 6. Is there any evidence in the selection 
from Macaulay that some of our problems are not as new as we think ? 
D. I. "The history of commerce is the history- of social and 
industrial development." Explain the parts played by economic 
differentiation and integration in this development. 

2. "The idea that value is a physical property of an object, if 
rigidly adhered to, would have prevented the development of medi- 
aeval commerce and the larger social system." Show some of the 
social values derived from this idea which tended to prevent industrial 
development. 

3. Make a list of the social values of the Middle Ages which were 
favorable to the development of commerce. 

4. "As an active instrument in the realization of a universal 
society commerce deserves to rank as the legitimate successor of the 
mediaeval church." How can commerce be thought of as the suc- 
cessor of the church ? Is this statement too strong ? 

5. Show the dependence of commercial success upon standardized 
and predictable conditions. What part has commerce played in an 
enlargement of the political unit ? in suppressing local disorder ? in 
rendering social arrangements more certain ? in standardizing legal 
codes ? in preventing war ? 

6. Review the list of current problems which you drew up in the 
first exercise in this course.. What problems in your list would not 
be present but for the commercial development of the last few cen- 
turies? What problems would be present but of quite different 
characteristics? What problems have been unaffected by the 
developing interdependence in social life ? 

5. Mediaeval Industrial Policy 

A. At many points mediaeval policy is strikingly in contrast 
to that of modern industry-. A spirit of group solidarity, a distrust of 
individual initiative, a high regard for the interests of the consumer, 
the personality of business relations, and the minute regulation of 
industrial activity seem alike quite strange to us. However, at present 
we are attempting to reclaim some of this ground which extreme 
individualism gave up and to re-create some of the values of the gild 
system. Yet the gild system was no industrial Utopia. • It may per- 
chance be, if all the facts were known, that our standards of business 
ethics are well in advance of those of this idyllic period. 



8 CURRENT ECONOMIC PROBLEMS 

C. I. Does the evidence presented in 4-7, 13, and 14 bear out 
the conclusions stated in 12 ? 2. In the mediaeval town was honesty 
the best policy? Did the gildsmen think so ? 3. Classify the tricks 
of trade mentioned in 14 and 15, and state as many modern parallels 
as you can. 4. Contrast in as many respects as you can gild ideals 
and gild practices. 5. What fundamental principles underlie the 
policies mentioned in the readings ? 

D. I. From the evidence which you have gathered would you 
say that mediaeval men acted from motives different from those 
which actuate men today? 

2. What evidences of the existence of a spirit of solidarity among 
modern industrial groups can you discover? Is it Hke that in 
mediaeval society ? 

3. "The gild period was the golden age in industrial society. 
Class lines were obscure, the feeling of brotherhood strong, the instinct 
of workmanship well developed, -goods were sold at reasonable prices, 
and the general code of business ethics was high." "A contrast of 
the ideals and practices of the gild period show the former to be 
sheer hypocrisy." What evidence Hes back of each of these general- 
izations ? What is overlooked in each ? Were the ideals sheer hypoc- 
risy ? Of what value were they ? 

4. ''The whole body of municipal market law can be reduced to 
two principles: first, sales must be public and at first hand; second, 
everything possible shall be produced in the town." Do you accept 
this statement? 

5. State any lingering survivals of mediaeval practices which 
have come under your observation. 

6. "The present tendency is back toward authoritative regulation 
of industry, toward consciously and deliberately making industrial 
activity conform to ideals which society sets up." Cite evidence in 
support of this statement. Of what value is mediaeval experience 
in solving the problems of social control with which we are now 
confronted ? 

6. Mediaeval Economic Theory 

A. Mediaeval life and thought find accurate representation in an 
economic theory whose early expression is ethical and dominated by 
an ideal of justice. This finds expression alike in the doctrine of 
stewardship, the theory of just price, the low value set upon com- 
merce, and the prohibition of usury. The last two of these, despite 
the magical instruments of social control which were used to secure 
conformity to them, were gradually, but radically, modified in the 
face of rising industrial culture. The first two, temporarily eclipsed, 



ANTECEDENTS OF MODERN INDUSTRIALISM 9 

have re-emerged in the very recent proposals for authoritatively 
regulating industry and fixing wages. Mercantilism is an expression 
of a people attaining nationalism and engaged in colonial exploitation. 
B- 75> 76, 78, 140, i43> US, 148, 200, 223, 321. 

C. I. In what terms would the modern sociologist express 
Aquinas' doctrine of stewardship? 2. What agencies of the control 
of industry are revealed in 17 and 18 ? Have they modern parallels ? 
3. In terms of the "theoretical tendencies" mentioned by Ingram, 
what thought today is mercantilistic ? 4. Do you agree with Ingram's 
estimate of the contribution of mercantilism to industrial de- 
velopment ? 

D. I. Can the early theories of commerce, price, and usury be 
explained in terms of contemporary industrial needs ? 

2. "The mediaevalist meant by a just price the customary price." 
Show that a theory of just price assumes a static society. By what 
ultimate standards did the mediaevalist attempt to determine the 
equity of a particular price ? Were they satisfactory ? 

3. Bring to the class any arguments, discussions, or proposals that 
you have been able to find which have underlying them the doctrine 
of stewardship. 

4. What large group of agencies of social control are suggested 
by these readings? Mention agencies of these types which are in 
use today. Do you regard them as important ? 

5. Give an account of the economic, religious, political, intel- 
lectual, and social conditions under which the theory of mercantilism 
arose. 

6. "To understand mercantilism aright, we must note the policy 
which it displaced, and which, at its inception, was its antithesis. 
This was not economic internationalism, as so many writers seem 
to think, but economic localism." If this was true, what light does 
it throw upon mercantilism as a factor in industrial development? 
Is it true? 

7. What relation is there between the dominance of mercantilism 
in English political thought and the American Revolution ? 

8. Make a careful comparison of mercantilist thought and its 
modern parallels. 

9. "A policy of national restriction, such as mercantilism, could 
not live in opposition to the larger commercial society which it was 
one of the most important factors in creating." W^hy? Does this 
mean that mercantilism wrought its own destruction ? 



II. THE INDUSTRIAL REVOLUTION 
7. The Antecedents of the Revolution 

A. A comprehensive presentation of the antecedents of the 
Industrial Revolution is impossible. Every aspect of life — ethical, 
religious, political, industrial, intellectual, and philosophical — made 
its contribution to the movement. The march of events — the Renais- 
sance, the great discoveries, the Reformation, the rise of nationality, 
the settlement of America — all of these had their part in determining 
its coming. Racial and geographic conditions caused it to appear 
first in England. In lieu of the complete story the readings presented 
suggest only a few of its many antecedents. They should, however, 
serve to reveal the movement as a slowly developing one compre- 
hending all the threads which together make up social life. 

C. I. Do you accept Marshall's statement of the contribution 
of the law of primogeniture to the Industrial Revolution? 2. Com- 
pare the industrial conditions on the eve of the revolution with those 
of manorial economy; those of gild economy. 3. Was the laborer's 
position then better or worse than it is now? 4. Is there any con- 
nection between "Spanish Gold" and the steam engine? 5. Why 
did not the revolution come a century earlier ? 

D. I. Why had so few improvements in technique been made 
from the fifth to the eighteenth century ? 

2. Give illustrations from Toynbee, or elsewhere, of each of the 
following characteristics of industrial life before the revolution: the 
short time of the productive process ; the limited extent of the market ; 
the personal character of industrial relations. 

3. "It is only when a people meet a crisis that they are ready to 
depart from their customary ways of doing things and to formulate 
new habits." Show how the opening of the New World brought 
England face to face with such a crisis. Show how, in the face of 
this crisis, the customary system was bound to go. 

4. "The settlement of America was in no little measure responsible 
for the great inventions which characterized the Industrial Revolu- 
tion." What influence had the settlement of America upon the 
extent of the market? the size of the factory? specialization in 
production ? the division of labor ? the capitalistic organization of 
industry ? the display of inventive genius ? 

5. Why did the Declaration of Independence, the French Revolu- 
tion, Adam Smith's Wealth of Nations, the great mechanical inven- 



THE INDUSTRIAL REVOLUTION ii 

tions, and Goldsmith's Deserted Village appear within a few years of 
each other ? 

6. "The Industrial Revolution is to be explained very largely in 
terms of the changed ratio of industrial resources to population 
effected by the settlement of America." By clear-cut illustrations 
show the importance of this ratio. Give the argument which leads 
to the conclusion stated above. Do you accept it ? 

8. The Nature and Scope of the Revolution 

A. Gradual as was its course, the industrial movement which 
we are studying wrought a general revolution in social life and values. 
The technique which it established proceeded from new and radically 
different principles. The organization which it effected was marked 
by a new and radically different distribution of industrial functions. 
It placed the welfare of all classes upon a pecuniary basis. It resolved 
society anew into social strata. Finally, in myriad ways, in the indus- 
trial, political, ethical, religious, and intellectual aspects of life, it 
created new standards, established new institutions, and raised new 
problems. 

C. I. When did the Industrial Revolution begin? end? 2.' 
What factors do you regard as of greatest importance in the develop- 
ment of the new technique? 3. Illustrate from your own observa- 
tion the slow subjugation of the industrial system by the machine 
technique. 4. Into what further industries and occupations do you 
expect to see the machine system extended? 5. Show, by a presen- 
tation of the facts in the light of the proper economic principles, how 
England came to face the alternative of cheap food or a lower margin 
of cultivation and higher rents. 6. Was the capitalist a product of 
the revolution ? the " wage- slave " ? capitaUsm? 7. By giving con- 
crete illustrations, show how many and what aspects of life were 
affected by the revolution. 

D. I. "The economic discovery of America made the craft 
technique inadequate." Explain. 

2. Point out the problems involved in the creation of the machine 
technique and the application of mechanical power, state the facts 
and principles which were necessary to a solution of these problems, 
and show how these were supplied by the scientific work of the 
seventeenth and eighteenth centuries. 

3. "The revolution may be described in terms of three essential 
changes: the productive process has been lengthened, the market 
has been enlarged, and industrial relations have become impersonal." 
What problems are associated with each of these three changes ? 
What essential changes have been omitted from the above list ? 



12 CURRENT ECONOMIC PROBLEMS 

4. "Modern civilization rests upon coal and iron." What im- 
portant changes in the localization of industries have come about 
because of the dependence of the new technique upon these minerals ? 
What part have they played in the growth or decline of nations in 
the nineteenth century ? Can England hope to remain " the workshop 
of the world"? 

5. "Productive industry is dependent upon science. Physics, 
chemistry, metallurgy, geology, and biology contribute to the estab- 
lishment and extension of our industries." Illustrate the relation 
of scientific "progress" and industrial development. What nation 
furnishes today the best example of the interdependence of 
the two ? 

6. In a discussion of the revolution why is so much attention 
given to the development, of the means of communication and 
transportation ? 

7. "Many of our legal, political, and religious institutions are 
much more consonant with the spinning-wheel than with the electric 
dynamo." What have spinning-wheels or dynamos to do with legal, 
political, or religious institutions ? 

9. Labor and the Revolution 

A. No aspect of the revolution has received so much attention 
as the rise of the "industrial proletariat." Accordingly it seems well 
to emphasize this phase of the great transformation of society by 
presenting two conflicting views as to what it has meant for labor. 
The questions raised will appear time and again in our later study. 

B. 118,254,283,355,366-69. 

C. I. Compare the viewpoints underlying the two readings. 
2. State the two conclusions as to the influence of the Industrial 
Revolution upon the welfare of the industrial laborer. 3. What are 
the questions at issue? 

D. I. Connect the Industrial Revolution with the rise of the 
"Fourth Estate." 

2. Did the revolution increase, or decrease, the importance of 
contract? What had this to do with the welfare of the 
workers ? 

3. Is a machine an instrument of production which tends to 
displace the laborer, or is it a device which increases his productive 
efficiency ? 

4. What has been the effect of the machine technique upon the 
standard of material comfort enjoyed by the laborer? Will the 
further extension of the machine technique produce like effects ? 



THE INDUSTR1.\L REVOLUTION 13 

10. The New Industrialism 

A. The new industrialism has its technical basis in the closely 
related capitalistic method of production, machine process, and fac- 
tory system. Its business basis is to be found in the institutions of 
the market, pecuniary valuation, and corporate organization, which 
are discussed elsewhere. Upon this foundation there has been created, 
not only a new industrial system, but a new economic culture. The 
modern problems of the home and the rise of the " economics of femin- 
ism" furnish a single example of the cultural changes which the new 
industrialism is effecting and the problems to which it is giving rise. 

B. 68,70,90,95,96,97,262. 

C. I. Is Forrest correct in his contention that capital causes a 
large amount of modern wealth to be socialized? 2. By reference to 
some establishment with which you are familiar explain concretely 
Biicher's definition of the factory system. 3. Of what practical im- 
portance is the view of the machine process expressed by Veblen? 
4. With what statements or conclusions of Davenport's do you agree ? 
With what do you take issue ? 

D. I. Is Forrest arguing implicitly for an industrial aristocracy ? 
a plutocracy ? 

2. "The individual is compelled to serve society by turning back 
into the productive processes much of the profit derived from invested 
capital." What does this mean? Assuming it to be true, o^ what 
value is it to the legislator considering the minimum wage, the income 
tax, the protective tariff, or some similar proposal ? 

3. What differences do you note between country and city 
laborers? The possession of what characteristics makes a good 
laborer under the domestic system ? under the factory system ? 

4. "By virtue of this concatenation of processes the modern 
industrial system at large bears the character of a comprehensively 
balanced mechanical process" (Veblen). Translate and illustrate. 

5. Show, by examples, how the machine process has affected our 
daily habits, our ways of thought, and our attitudes on public ques- 
tions. Cite evidence of the use of the machine process in religious 
and educational work. 

6. Enumerate as many religious, ethical, political, and social prob- 
lems as you can which have been affected by the Industrial Revolution. 

II. The Extension of Industrialism 

A. The Industrial Revolution is still in process. Industries old 
to the machine process are using more and more complicated devices. 
Industries new to it are feeling its transforming touch. The changes 
which it is destined to effect in our social arrangements have, perhaps, 



14 CURRENT ECONOMIC PROBLEMS 

only begun to make themselves manifest. Quite as important 
is the generally neglected extension of the industrial system. The 
competition of industrial and non-industrial culture, the victories of 
the former, the ever-expanding area of the modern industrial system, 
and the reactions of this contact upon the system are of great current 
importance and fraught with grave future meaning. 

C. I. Mention the various aspects of Western and of primitive 
culture which are coming into conflict along the "margin of civiliza- 
tion." In each case what is the result? 2. Compare in detail the 
industrial system of the West and that which is being established in 
the East. 3. Of what utility is Johnson's distinction between "capital 
proper" and "exploitative capital"? 4. Do you accept the argu- 
ment connecting exploitative capital with war ? 5. State, as definitely 
as you can, the effects upon Western industrial culture of its economic 
conquest of primitive cultures. 

D. I. Can you associate exploitative commerce with the Colo- 
nial wars of the seventeenth and eighteenth centuries ? 

2. A capitalist invests $100,000 in a mine, uncertain as to whether 
he will get anything in return or not. At the end of three years he is 
making $50,000 per year net, or 50 per cent on his investment. It 
appears certain that this rate will continue indefinitely. The ordinary 
rate of return from investments equally safe is 5 per cent. Will the 
value of the property remain $100,000? Will the investor have to 
continue owning the property to get the future returns upon his 
lucky investment? What may he be expected to do? If he sells, 
what rate of return will the purchaser make on his investment? 
What general conclusions are suggested by these questions ? 

3. Why has America in the past been exporting so little capital? 
Why are we now beginning to export capital? What political or 
economic import do you attach to the change ? 

4. "The relation of the industrial and non-industrial parts of 
the world may be thought of as an area wherein uniform prices tend 
to prevail, surrounded by areas which have prices radically different." 
Trade between parts of the same area can yield profits how large ? 
between different areas? Why in the latter case is monopoly so 
essential to the traders ? What relation has the state to the mainte- 
nance of such monopolies ? Cite historical examples. Of what con- 
sequence are these things in international affairs ? 

5. What, in your opinion, is the relation of the extension of 
industrialism to nationalism ? 

6. Is modern industrial culture superior to that of the native 
culture which it displaces? What makes you think so? What are 
the standards by which you pronounce one culture superior to another ? 

7. Will the world eventually constitute a single industrial com- 
munity ? 



III. SOCIAL CONTROL IN MODERN INDUSTRIALISM 
12. The Nature of Progress 

A. The ultimate object of our study, it must not be forgotten, 
is the formulation of an economic program. But a program implies 
an end to be attained. We must accordingly, though not necessarily 
in this lesson, or even in this course, eventually decide upon that end. 
The making of such a decision implies a clear distinction between 
development and progress, and the formulation of a working concept 
of the latter. 

B. 26, 27, 254, 355, 361, 362, 382. 

C. I. Enumerate the aspects of human culture. Do they all 
move " forward ' ' together ? What do you mean by forward ? 2 . What 
is the common denominator of change in these various aspects 
of life ? 3. Is a scientific definition of progress possible ? 4. What is 
the practical importance of the distinction between evolution and 
progress? 5. In formulating your concept of progress what weight 
would you attach to the various criteria mentioned by Bryce ? What 
important criteria does he omit? 

D. I. Can society determine what it is to be ? 

2. Is civilization an advance over barbarism? Is our culture 
superior to that of the Middle Ages ? Are England's social arrange- 
ments superior to Italy's ? to China's ? How do you know ? 

3. "To argue against conscious control of industrial activity on 
the ground that, without it, the fittest survive, is to argue in a circle." 
Give the argument supporting the above conclusion. 

4. Is there a confusion between evolution and progress in any of 
the following quotations ? 

God's in his heaven, 
All's right with the world. 

Yet, I doubt not, through the ages one 
increasing purpose runs. 

# 

One life, one law, one elernent, 

And one far off, divine event. 

To which the whole creation moves. 

I don't know where I'm going, 
But I'm on my way. 

IS 



1 6 CURRENT ECONOMIC PROBLEMS 

5. "The greatest discovery of the nineteenth century is that we 
are on our way." What makes you think so ? 

6. " The masses have never made any contribution to the develop- 
ment of civiHzation. All progress has been the result of the efforts 
of a very small and select group." What social ideal is implicit in 
this quotation ? Do you know of any society which has consciously 
acted upon it? What scheme of the distribution of wealth does it 
suggest? Should we accept this ideal? 

7. "Social progress consists in a bettering of the material condi- 
tions of the masses." Answer the questions asked under 6. 

8. "If we are to have progress, the productive equipment of 
society must be increased. Capital must be accumulated in increasing 
amounts." Compare the ideal implicit in this and the two preceding 
quotations. What social arrangements favor the accumulation of 
capital ? Is the end of such a program the good of the few or of the 
many? 

9. Would you rather live beneath God's blue sky or capitalistic 
smoke ? Has this antithesis any bearing upon the problems of immi- 
gration and the tariff ? 

13. The Control of Economic Activity 

A. If we are some time or other to formulate an economic 
program, we must learn what the agencies of social control are, how 
they act, and how they can be manipulated. We must come to 
appreciate the vast and complex system of instruments which society 
has slowly fashioned, and which may be used singly or in infinite 
combinations. If their bewildering nature makes understanding hard 
and manipulation difl&cult, it but evidences the multifarious and deli- 
cate work which they can be made to perform. It is the object of this 
assignment to make a beginning of an understanding of this system. 

B. 15, 67, 70, 319, 327, 380. 

C. I. What agencies of control can be used to secure quick 
mechanical changes ? Illustrate. 2. What agencies to secure gradual 
and organic adaptations ? Illustrate. 3. What agencies can be used 
directly to secure the object aimed at ? 4. What agencies effect their 
objects quite indirectly ? 5. What agencies mentioned in the readings 
are most often overlooked in programs of control? 6. Illustrate, by 
citing concrete cases, the dangers of overlooking important agencies 
of control. 

D. I. "A distinction between evolution and progress leads 
inevitably to the elaboration of a program of social control." Why ? 

2. "Because of the multiplicity, variety, and efficiency of the 
agencies of control which we possess — despite the gravity of our 



SOCIAL CONTROL IN MODERN INDUSTRIALISM 17 

ignorance — we could not escape social control if we would." Show 
why quite definitely. 

3. Compare the problem and agencies of social control of the gild 
period with that of modern industrialism. 

4. Show, by illustration, how each of the following' has served 
as an agency of social control: the miracle plays, auricular confession, 
the worship of saints, symbolism, romantic literature, Cartesian 
philosophy, the elective system, the high social value set on thrift, 
the union label, vested interests. 

5. Why have theories of social control been expressed so largely 
in the past in terms of state activity ? 

6. Which are the more efficient agencies of social control, the 
slowly developing institutions, such as family life, education, and 
ethical systems, or those promising immediate results, such as legis- 
lation, revolution, and the like ? 



14. The Statement of the Laissez-faire Theory 

A. For our immediate purpose the most important aspect of 
the problem of social control is that of the relation of the state to 
industry. The theory which dominated legislation, during the nine- 
teenth century was laissez-faire. This theory is still quite potent. 
Its dominant note— that of limitation of the powers of government — 
presents a problem which will always be with us. In view of our larger 
problem we must form some notion of what laissez-faire was — and is. 

B. 61, 135, 318, 332, 357. 

C. I . In what readings do you find an implied antithesis between 
nature and the state? Is this antithesis necessary to the laissez-faire 
theory? 2. Compare the views of Blackstone and Ravenstone; 
Rousseau and Godwin; Smith and Bentham. 3. What fundamental 
assumptions underlie the theory of laissez-faire? 4. What has 
Ingalls's Opportunity in common with the laissez-faire theory ? 

D. I. Strip Adam Smith's argument against governmental 
restraints of its concrete matter and restate it in terms of the general 
relationship of industry and the state. 

2. "The philosophical basis of laissez-faire is the fact that we 
cannot tell before the event who is wise and who is foolish." If this 
is true, under what conditions would you expect laissez-faire to become 
the dominant philosophy ? 

3. Is there any connection between the appearance of so-called 
self-made men and a belief that in the industrial game the state 
should keep hands off ? 

4. How can the state justify itself in taxing the bachelor for the 
support of the public schools ? Is this laissez-faire ? 



1 8 CURRENT ECONOMIC PROBLEMS 



V 



5. Why did laissez-faire come with the settlement of America, 
and the extension of the machine process ? , 

15. The Interpretation of Laissez-faire 

A. To prove or disprove laissez-faire is a simple matter. To 
analyze it, determine its dements, and understand them is a difl5cult 
task. In content and form the theory seems unintelUgible except 
against the background of the rapidly expanding machine culture 
which produced it. Its negative statement has served as a mask for 
the many positive features with which it is clothed; for it insists as 
strenuously upon authoritative guidance and interference at certain 
points in our arrangements as it opposes them at others. The ques- 
tion of its validity becomes, accordingly, not one of the general 
theory, but of the concrete proposals which make it up. 

B. 40, 57- , . . 

C. I. Do you accept the "principle of utihty " ? 2. What is its 
relation to the theory of laissez-faire ? 3. Wherein do you differ from 
Mill in his opposition to government interference ? in his statement 
of the province of government ? 4. What is the place of authority 
in the theory of laissez-faire? 5. Does Cairnes attack the argument 
for laissez-faire or its assumptions ? Does he prove his case ? 

D. I. Can there be a game without "rules of the game" ? Can 
there be such a thing as laissez-faire ? 

2. Why did not mediaeval Europe evolve a theory of laissez-faire ? 

3. Is there any connection between laissez-faire and liberalism? 
Methodism ? the Declaration of Independence ? the French Revolu- 
tion? utilitarian ethics? individualistic philosophy? the elective 
system ? Are these things in any way connected with the changed 
ratio of population to resources attending the settlement of America ? 
the antithesis between the old restrictive system and the new machine 
technique ? 

4. "The true function of the state is to suppress force and fraud." 
But what are force and fraud ? 

5. Can laissez-faire be laissez-faire and take the policeman, prop- 
erty, and the courts for granted ? What else does laissez-faire take 
for granted? 

6. "To the practical man the precept 'Laissez-faire' never meant 
'Leave everything alone,' or even 'Leave all natural things alone,' 
but simply, 'Leave alone certain things which I think ought to be 
left alone'" (Cannan). Illustrate by citing specific evidence of the 
actual relations of the state to industry in the "laissez-faire period." 

7. "Laissez-faire has been from the very first a theory of social 
welfare." Defend this statement. 



SOCIAL CONTROL IN MODERN INDUSTRIALISM 19 

8. ''Laissez-faire was originally a cry for militant reform." What 
is it now ? 

9. "The acceptance of the idea of evolution has caused a restate- 
ment of the theory of laissez-faire. Its goal was once ' the good of all.' 
It has now become ' the survival of the fittest.'" Explain this change 
in detail. Does the contemporary argument rest upon a firm logical 
basis ? 

16. The Protest against Individualism 

A. For some time a spirit of protest has been rising against the 
extreme individualism which dominated our institutional develop- 
ment and our social philosophy in the nineteenth century. This is 
due in part to the changed ratio of our population to our industrial 
equipment and in part to the unsatisfactory social conditions which 
have followed in the wake of the machine. It finds expression alike 
in the appearance of new problems — or problems new to us — and in a 
changed attitude toward the relation of the state to industry. 

B. 74, 203, 248, 318, 355, 362, and pp. xxxii-xxxviii. 

C. I. What connection is there between the machine and urban 
misery and poverty? Is the connection inevitable or accidental? 
2. Why are we attempting to explain so much of current history in 
terms of the "passing of the frontier"? 3. What "new issues" 
involve institutional changes? changes in mental attitudes? mere 
extensions of old policies ? 4. With Brown's statement as a point of 
departure, make a list of the social and economic issues with which 
we are now confronted. 5. Is Ingalls or Mr. Dooley right about 
opportunity ? 

D. I. Has American prosperity been due to our "fundamental 
institutions," our "individualistic policies," and the "wisdom of our 
statesmen"? Or has it been due to the potential resources of the 
country ? 

2. Make a list of the "paramount issues " in American presidential 
elections since the Civil War. How do you account for the fact that, 
generally speaking, none of these have been questions of serious 
social importance ? Why are so many social problems of tremendous 
import just now appearing on our horizon ? 

3. "For the laborer the system of chattel slavery was far better 
than the current system of wage slavery. The future wages of the 
slave were capitalized into a current value that the slave-owner was 
forced to conserve. This insured care of the laborer's health and 
strength. Slaves were not worn out and scrapped, like old machinery, 
as they are under the present system of free contract." Do you agree ? 

4. Does the machine favor the concentration of wealth ? 



20 CURRENT ECONOMIC TROBLEMS 

5. "America of the ninelcenlli century was in a stage of increasing 
returns." "Democracy as yet has not proved its case." What is 
the connection between these two statements ? 

17. The Theory and Program of Social Control 

A. In response to the changing conditions just studied there is 
appearing a new philosophy of social control. In antithesis to laissez- 
faire it formally subordinates the interests of the individual to those 
of the larger group. It seeks solutions of our "new" problems in pro- 
grams, differing widely in spirit and content from those of the nine- 
teenth century. Its proposals are gradually becoming more definite, 
and it is a factor of increasing importance in any consideration of 
current economic problems. 

B. 16,38,74,195,318,326,331. 

C. I. Compare Green's theory of individual liberty with Mill's. 
2. Make an application of Green's theory to several economic prob- 
lems not mentioned by him. 3. On the basis of the arguments 
advanced by Blease, Hobhouse, Adams (74), and Holmes (318), outline 
the case against the "evolutionary argument for letting things alone." 

4. Show, from the evidence presented by Hobhouse and Dixon 
(195), what laissez-faire tends to become when put to the actual test. 

5. Is Wilson's program comprehensive ? definite? relevant? 6. Are 
the assumptions underlying Wilson's program those of Mill or of 
Green ? 

D. I. "Social reform is only evolution conscious of itself." 
With this as a text, deliver a homily against the biological arguments 
for letting things alone. 

2. "Laissez-faire and social control are not antithetical proposals. 
Just as laissez-faire has a positive side, so social control has a negative 
side. The questions at issue are the nature, degree, and subjects of 
control." By illustrations show the negative proposals implicit in 
social control. Show the importance of the last sentence. 

3. Advocates of the two opposing doctrines agree that "the 
universe has been so contrived that the interests of the individual 
and of society are identical." Show how the advocates of laissez- 
faire and of social control differ as to which is to be left alone, the 
individual or society. 

4. Has liberalism within the last hundred years changed its end ? 
its program ? its social philosophy ? 

5. "The Fourteenth Amendment does not enact Herbert Spen- 
cer's Social Statics" (Justice Holmes). Is there an antithesis between 
the fundamental presuppositions underlying our institutions and the 
incipient program of social control ? 



SOCIAL CONTROL IN MODERN INDUSTRIALISM 2i 

6. "Wilson's inaugural address is based upon the same presup- 
positions as to the welfare of society as lie at the basis of orthodox 
economic theory." Do you agree ? 

7. Determine quite definitely the meaning and implications of 
each of the following, and outline the program to which each would 
lead: (c) "the greatest good to the greatest number"; (b) "equal 
rights to all, special privileges to none"; (c) "social justice"; (d) 
"equality of opportunity"; (e) "to each according to his productive 
ability"; (/) "from each according to his ability, to each according 
to his need." Are rights, privileges, goods, opportunities, abilities, 
and needs things which exist in themselves, or is their existence 
conditioned by the general situation of which they are aspects ? 

18. Conservative Factors in Development of Social Control 

A. But, before predicting sweeping ' ' social reform, ' ' let us remem- 
ber that our system has its conservative, as well as its radical, elements. 
A constitution that rigidly circumscribes social action, a strong dis- 
trust of "government meddling," shared by "big" and "little" 
business alike, a pecuniary system that identifies the immediate 
interests of all classes with those of the entrepreneur, and a tendency 
for the reform movement to discredit itself by ill-considered action 
are only a few among the many factors checking radical change. 
However radical or conservative our views, we must admit the 
importance of these elements and give proper consideration to them 
in any program of reform. 

B. 12, 233, 289, 319, 324, 5S3- . 

C. I. Are constitutions in their very nature conservative? Is 
ours more than others? 2. Is there a "legislative crusade against 
business" ? Why do business men so generally think that there is? 
3. Cite opinions you have heard similar to those contained in 61 and 
02. 4. Connect the sensitiveness and delicacy of the machine process 
with the dominance of the entrepreneur viewpoint. 5. What factors 
in society oppose the dominance of this viewpoint ? 6. Name legis- 
lative enactments and proposals which run counter to the five general 
conditions mentioned by Root. 

D. I. "A constitution is not intended to embody a particular 
economic theory." Do you agree? Does ours embody a particular 
theory ? 

2. "Within the last hundred years the aristocracy and the middle 
class have exchanged places as opponents and defenders of laissez- 
faire." Explain. Is the laissez-faire of today the laissez-faire of one 
hundred years ago ? 

3. Account for the increasing support given to "state's rights" 
by prominent business men. 



22 CURRENT ECONOMIC PROBLEMS 

4. "Industrial America is organized as a hierarchy." Defend 
or attack this statement. 

5. "Exactly the same interests are responsible for protection in 
this country and free trade in England." What interests? How 
can they be furthered by different policies in different countries ? 

6. " It is the stability of conditions imparted by the conservatism 
of the legal system which makes industrial progress possible." Can 
you construct the argument leading to this conclusion ? 

7. Is a stratification of society on pecuniary lines a necessary 
condition of industrial progress ? of social progress ? 

19. The Basis of National Efficiency 

A. If we are to "get somewhere," we must have an idea of where 
we are going. If we are to formulate an economic program, it must 
have an end in view. It must aim at making our society in some 
respects different from the one we know today. Every program 
advocated today has an ideal society as its goal. By way of illus- 
tration two antithetical societies are presented in this assignment. 
Other types will readily suggest themselves to the student. 

B. 221, 253, 379. 

C. I. Could America have succeeded with the German social 
system? 2. Could Germany have succeeded with the American 
system ? 3. What are the basic differences between the two systems ? 

D. I. Compare the ratios of population and industrial equip- 
ment in America and in Germany. Which factor has each had to 
conserve ? Can you argue that American waste of resources has been 
a saving of a more valuable product, labor ? Has Germany used its 
labor as efficiently as America has ? 

2. "The German system, through its efficient organization, tends 
to a fuller present utilization of current resources; the American 
system, through its scope for individual initiative, tends to a full®- 
utilization by society of its capacity for development." Work out 
this contrast in detail. Which is the more valuable national asset, a 
highly organized system which puts every man in his place, or one 
which allows such liberty that individuals in any class have reasonable 
opportunities to develop inventive ability? Has a country of the 
first type surrounded by countries of the second type any superlative 
advantage over its neighbors? 

3. What conclusions are erroneously drawn from German experi- 
ence with such reforms as vocational education, old-age pensions, and 
the like ? Of what positive value is German experience ? 

4. "America would be a poor place for a Hohenzollern efficiency 
test" (Orth). Why? 

5. What is the goal of the tentative economic program which 
you are formulating ? 



IV. THE PECUNIARY BASIS OF ECONOMIC 
ORGANIZATION 

20. Price as an Organizing Force 

A. Perhaps our most important problem is an improvement in 
economic organization. Of this, many of our current problems, such 
as unemployment and crises, are mere aspects. To understand this 
problem in its many ramifications we must understand the institutions 
which make up our economic organization. One of the most important 
of these, generally overlooked in lay discussion, is price. 

B. 38-40, 70, 95, 97, 319, 327. 

C. I. Following the suggestions of Cannan, draw up a report 
on our social organization for the Association for the Advancement of 
Science of Saturn. 2. Enumerate the problems which would have 
to be solved by a committee which authoritatively set about supplying 
New York City with consumptive goods. Could they solve the 
problems ? 

D. I. "In place of disorderly individual effort, each man doing 
what he pleases, the socialist wants organized effort and a plan" 
(H. G. Wells). Is the implication that the present system is without 
order and plan correct ? 

2. What determines the number of each of the following: civil 
engineers ? bank presidents ? hod-carriers ? horses ? automobiles ? 
potatoes ? books on economics ? wheat acreage ? steel mills ? lino- 
type machines? typewriters? Is there any system here? 

3. "Price is an industrial barometer. By advancing or falling 
prices producers are warned that society desires more or less of 
certain commodities." Explain with illustrations. 

4. "The whole machinery of buying and selling is simply a 
convenient means of combining effectively the various factors in 
production and of assigning the appropriate shares of the product 
to those who have claims upon it." Explain with illustrations. 
Show how price regulates consumption. 

5. "Our economic co-operation is regulated through price- 
variations." Explain. 

21. Pecuniary Competition 

A. A complementary organizing institution is pecuniary 
competition. Through its selective tests production is organized, 
distribution effected, and consumption regulated. It is nd antithesis 

23 



24 CURRENT ECONOMIC PROBLEMS 

of co-operation, but the agency through which the varied elements 
of our industrial world are brought into active co-operation. 

B. 68, 133, 176, 203, 254. 

C. I. By citing quite divergent examples indicate the univer- 
sality of competition. 2. Following Cooky's argument, show how 
competition organizes college activities. 3. Criticize Kingsley's con- 
cept of competition. 4. What is the fundamental importance of the 
distinction made by Adams? 5. Is competition necessarily asso- 
ciated with laissez-faire? 6. Can competition itself have an ethical 
character ? If not, what is it that is to be adjudged good or bad ? 

D. I. Is there any competition between the engineer and the 
lawyer ? the hod-carrier and the scavenger ? moving pictures and 
ice cream? a warm dinner and a new lace collar? a piano and a 
trip to Europe? hats and shoes? an unborn child and a new 
home ? 

2. What is the basis of competition between college students? 
members of the same ball team ? rival shoe manufacturers ? econo- 
mists ? dramatists ? good fellows ? society women ? settlement 
workers ? May the basis of competition be changed in any of these 
cases? What changes in the "plane," or general conditions, of 
competition are possible ? 

3. Is there any competition within a public business, such as 
education ? within a monopoly ? Would there be competition within 
a business under socialism ? between businesses ? In which of these 
cases would competition be pecuniary? non-pecuniary? What 
substitute can be found for competition as an organizing agency ? 

4. "A producer has more control over cost than over selling 
price. He is therefore under constant temptation to use cheap 
materials, to underpay labor, or to use unfair methods." Is this 
temptation inherent in the nature of the competitive system ? Can 
you mention instances of businesses unable individually to raise 
their standards, and yet welcoming legislation forcing all competitors 
to a higher plane ? What is the point to be made ? 

5. " Competition is not law, but lawlessness. In competition, not 
character, but cunning, survives." "Competition was the gigantic 
motor that lifted our race in the nineteenth century to a standard 
where the mode of living of common laborers is more comfortable 
and desirable than the everyday existence of kings of whom Homer 
sings." Are the authors of these two quotations talking about the 
same thing ? 

6. "The detailed warfare of businesses in a trade is a truly co- 
operative economy which enables the industrial energy of the whole 
trade to function most productively" (Hobson). Translate and 
illustrate, f 



PECUNIARY BASIS OF ECONOMIC ORGANIZATION 25 

7. "It is only through competition that price can cause the 
limited resources of society to be used in such a way as to produce 
goods of proper kinds and in proper quantities to afford society the 
maximum of utiUties." Make this intelligible. Do you believe It ? 

22. Price-Fixing by Authority 

A. Prices are the products of a myriad forces which express 
themselves through competition. As organizing agents they lead to a 
myriad of consequences. But we may not like them; their conse- 
quences may fail to satisfy us. In such cases is it possible to set 
them aside and substitute others more to our liking ? This question 
we must examine, for more than one proposal involving the substitu- 
tion of "artificial" for "competitive" prices is before us. 

B. 17, 18, 208, 279, 282. 

C. I. Why could not the provisions of the Statute of Laborers 
be enforced ? 2. How is "right and proper" price to be determined ? 
3. What current projects of reform involve proposals similar to those 
of the Statute of Laborers or Luther's proposed commission ? 4. 
Examine the case for and against "artificial" price-fixing. 

D. I. Show, by citing a concrete example, say that of the 
minimum wage, that price-fixing is a regulation of production, dis- 
tribution, and consumption. 

2. Cite as many examples as you can of prices fixed by custom 
or authority. How are these to be explained ? How does a monopoly 
manage to maintain prices ? With what classes of commodities, by 
"what devices, and within what limits may we consciously "fix prices " ? 

3. How did it come about that so many "customary" or "right" 
prices were maintained for long periods during the Middle Ages? 
Did the stability of economic conditions have anything to do with it ? 
How many of these customary prices survived the changed conditions 
appearing with the break-up of the mediaeval system? 

4. Why do modern states attempt to regulate the rate of interest, 
but make no similar attempt to regulate wages? Do they succeed 
with interest ? 

23. The Function of Middlemen 

A. Is the pecuniary organization of society which we have 
sketched an economic one ? Do pecuniary rewards and useful func- 
tions always go together ? To take a single example, it has long been 
insisted that "middlemen" are "parasites," that they "love to reap 
where they have not sown." An analysis of their functions shows 
that we could not easily get along without them. That we could 
not get along with fewer of them is not so clear. 



26 CURRENT ECONOMIC PROBLEMS 

B. 358. 

C. I. Were the " f orestallers " condemned by mediaeval statute 
and by Washington analogous to the middlemen of our system ? 
2. On the basis of the readings from Withers and Nourse, make a 
general statement of the functions of the middleman. Illustrate 
from some business not mentioned in the readings. 

D. I. "Farmers, miners, fishermen, and manufacturers have 
long been considered producers. But productivity was long denied 
the services of ministers, teachers, musicians, buffoons, and skirt 
dancers." What conception of wealth is at the basis of the distinc- 
tion? In what respects is it erroneous? Why have men been so 
prone to regard middlemen as non-producers ? 

2. "The seller of cut glass ware frequently makes 100 per cent 
upon his merchandise; druggists not infrequently sell prescriptions 
at an advance of 200 per cent to 300 per cent above the cost of the 
ingredients going into them." Do these percentages in themselves 
indicate excessive gains? What is overlooked by the author of the 
above quotation ? 

3. A man who Had paid $4.00 for a barrel of apples found inside 
this note: "Dear Consumer: I was paid eighty-five cents for this 
barrel of apples. How much did you pay? Producer." Is there 
evidence that either producer or consumer was cheated ? 

4. One of. seven competing grocers advertises in the paper. Does 
it pay him immediately ? What will the other grocers do ? In the 
end how much better off will anyone be? When the custom has 
become established, can a grocer cease advertising? The costs of 
advertising will eventually be borne by whom? Does competition 
tend to raise or lower costs of production ? 

5 "The high prices made possible by an agreement between 
retailers yield large profits which draw others into the business. In 
the end no merchant is getting an excessive return, but a much 
larger amount of capital is invested and a greater number of mer- 
chants are employed in retail merchandising than the services to be 
performed warrant." Does your own observation bear out or refute 
this conclusion? 

24. Speculation 

A. They who insist that in our society pecuniary rewards may 
be wholly dissociated from services rendered bring a second indict- 
ment, this time against the speculator. The charge against speculation 
is much more serious than that against merchandising. The recent 
agitation against "dealing in futures" makes timely, as well as perti- 
nent, an examination of the place of speculation in the organization 
of industrial life. 



PECUNIARY BASIS OF ECONOMIC ORGANIZATION 27 

B. 96, 132. 

C. I. Differentiate, as clearly as possible, investment, specula- 
tion, and gambling. 2. Show by concrete illustrations that the stock 
and produce exchanges are markets. As such, what functions has each 
to perform? 3. Draw up a glossary of terms used in speculation. 
4. Using a hypothetical illustration of your own, explain, step by step, 
a typical speculative transaction. 5. Draw up a system of accounts 
covering the transactions mentioned by Stephens. By means of 
these show the utility of hedging. 6. Using a hypothetical illustra- 
tion, trace the course of the price of a given stock through a year, 
showing the various forces which affect it. 7. Give examples of 
manipulation which have come under your observation. 8. Illus- 
trate the economic functions performed by the stock exchange. 
9. What is there for us in the account of Germany's experience 
with exchanges ? 10. What features of speculative activity do you 
regard as good ? as evil ? 

D. I. Draw lines between investment, speculation, and gam- 
bling in the following group of instances: buying a share of stock 
with the intention of keeping it and actually keeping it; buying it 
with the intention of keeping it, but disposing of it because of an 
unexpected increase in price; buying it with the object of keeping 
or disposing of it according to circumstances ; buying it for cash with 
the object of selling soon at a profit; buying it on a margin with the 
object of selling at a profit. 

2. Did you, as a college student, ever take a difficult course and 
"hedge" with one quite easy ? Give as man}^ examples as you can of 
practices analogous to hedging. 

3. " Speculation in wheat tends to lower the price of flour without 
lowering the price of wheat." Show how this comes about. 

4. "Speculation tends to increase the supply of wheat by an 
addition of the paper supply sold by the bears, thus depressing the 
price." What fact is overlooked ? 

5. "Under the conditions fixed by organized speculation a buyers' 
monopoly of wheat or cotton is an impossibility. A buyers' monoply 
of tobacco has been made possible by the very fact that there is no 
organized speculative market for tobacco. Thus the speculative 
market is a strong support of a competitive system." Cite other 
arguments supporting the last statement. Is it valid ? 

6. Show how speculation assists in establishing a single price in a 
single market. How comprehensive does it tend to make that mar- 
ket ? Show how this price acts as a guide to production. 

7. "The stock exchange, that delicate register of values, that 
sensitive governor of production, that accurate barometer of the 
people's needs, could not be replaced by any process that any state 



28 CURRENT ECONOMIC PROBLEMS 

socialist has devised or suggested" (Conant). Explain each of the 
above phrases descriptive of the stock exchange. What is the rela- 
tion of speculation to the pecuniary organization of industry under 
competition ? For the performance of these functions what substitute 
can you suggest ? 

8. Follow the price of Pennsylvania preferred, one other railway, 
and one industrial stock from now on to the close of the course. Plot 
on a graph the courses of these three securities. Explain all general 
variations of the market as indicated by the three. Explain varia- 
tions in each of these from the courses of the others. ^ 

9. Draw up a legislative program which will strip speculation of 
"manipulation" and gambling and will leave it as free as it is at 
present to perform its proper economic functions. 

25. The Corporation 

A. It is impossible in this connection to make a study of all the 
institutions which contribute to the pecuniary organization of society. 
It has been found necessary to treat even such important agencies as 
the family, the labor union, property, and contract elsewhere. But 
to give a semblance of completeness to this aspect of our study, it is 
necessary to take account of one other institution — the corporation. 
Superficially the corporation seems to involve a question of the form 
of organization of the business unit. Basically, however, it performs 
important functions in the larger task of organizing investments, 
management, and labor into productive combinations. 

B. 96, 174, 213. 

C. I. Draw up a glossary of the terms of corporation finance 
used in these readings. 2. What are the advantages to the corpora- 
tion and to the public in issuing different classes of securities ? 3. Is 
it to the interests of the management to follow a policy pecuniarily 
advantageous to the owners? 4. Is the welfare of the corporation 
necessarily dependent upon service to the public ? 5. Show, by con- 
crete examples, how the corporation encourages savings and increases 
the productivity of capital. 6. Does the corporation increase the 
productivity of labor ? of managing ability ? 

D. I. Why did the corporation first appear in the commercial 
field ? What economic changes are responsible for its general invasion 
of the industrial field? Is it adapted to agricultural industry? to 
merchandising ? 

2. Draw up a scheme for the issue of corporate securities that 
will throw control of the business into the hands of those who will 
take long chances; into the hands of those who will play safe. 



PECUNIARY BASIS OF ECONOMIC ORGANIZATION 29 

3. "In a corporation the interests of the owners, the management, 
and the public are out of harmony. The conflicting interests give 
rise to several very troublesome problems." Enumerate and illus- 
trate the various types of conflict that may arise. How is owner- 
ship to be protected against management? against the public? 
How is the public to be protected against each ? 

4. "The existence of the corporation imparts fluidity to the 
various factors of production and permits them to be used in the 
most efficient combinations." Show, by illustration, how the cor- 
poration utilizes most efficiently business ability, capital, and labor. 

5. "The corporation acts as an insurance against risk and stimu- 
lates investment in new enterprises." Enumerate and illustrate the 
functions performed by the corporation in industrial development. 

6. Is there any causal connection between the corporation and 
the concentration of wealth? the stratification of society? the 
appearance of a leisure class ? 



V. PROBLEMS OF THE BUSINESS CYCLE 
26. The Delicate Mechanism of Industry 

A. In its long-time aspects the problem of economic organization 
is complicated by two characteristics of the industrial system. First, 
goods are being produced in anticipation of demand for an unknown 
future market. This may disappear before the process is complete, 
causing financial losses to the producers. Secondly, trades, prices, 
and credits are tied together into a closely articulated and extremely 
sensitive system. By reason of this the financial disaster mentioned 
threatens to become quite general. 

B. 30, 255. _ 

C. I. Show, by concrete examples, the unknown factors m the 
problems with which "business enterprise" grapples. 2. Give illus- 
trations of the most important lines of price relationship, 3. Explain 
the "sensitive mechanism of credit" by beginning at a point other 
than the one at which Moulton begins. 4. Enumerate the elements 
making for and against the " planlessness " of production. 5. Why 
is the organization of our productive system subject to periodic 
disturbance ? 

D. I. Compare the problem of efiScient economic organization 
under the manorial system and under modern industrialism. If 
goods were produced "to order," could modern crises and depressions 
appear ? 

2. "The lack of a well-co-ordinated system of control makes 
industry resemble, at present, a mob rather than an army." Upon 
what do we depend for a correlation of industrial units? Is the 
dependence well placed ? 

3. What is the connection between the "roundabout process" of 
production and oscillations in trade? 

4. Connect the complicated mechanism between producer and 
consumer and that between accumulators and investors of capital 
with periodic disturbances in industry. 

5. "Under our present system a course of error may be persisted 
in for a considerable time without retribution." Illustrate. What is 
the result when retribution finally comes ? 

6. "Our present system permits the accumulation of debts up 
to the point where they can no longer be carried and a general collapse 
must follow." How is such an accumulation possible? Why does 
the collapse come ? 

30 



PROBLEMS OF THE BUSINESS CYCLE 31 

27. The Economic Cycle 

A. The more conspicuous disturbances to which the industrial 
system is subject, such as crises and depressions, have long been 
noted. Only recently, however, have economists come to see that 
there is a persistent variation in the volume of business and to 
elaborate a definite theory of the "economic cycle." 

B. 120, 121, 132, 259 

C. I. In arguing that crises come "periodically," is Nicholson 
arguing that they come at regular intervals ? Is he right ? 2. Begin- 
ning with "flush" times, give Mitchell's explanation of the course of 
the cycle. 3. What advantages, if any, has the newer theory of 
"economic cycles" over the older one of "crises" ? 

D. I. Account for the growing tendency to treat crises as an 
aspect of the general industrial system rather than as a mere phase 
of the financial system. 

2. " Crises could not occur at regular intervals." If it were known 
that a crisis was destined to appear at a certain time, how would 
men act ? In view of this activity, could the crisis appear ? 

3. Using an economic history of the United States for data, write 
a short history of "Economic Cycles in America." 

4. Account for the extreme rhythm of business activity in America. 
What has been the relation of railroad building to the extreme sweep 
of the cycle ? 

5. What place has each of the following in the theory of the 
economic cycle: money economy? time-consuming methods of 
production? accumulations of new capital? development of tech- 
nique ? application of machine technique to our continent ? extension 
of industrialism ? world-wide market ? war ? fashion ? 

6. Is Mitchell's explanation of the business cycle to be regarded 
rather as a contribution to financial or to general economic theory ? 

28. The Antecedents of Crises 

A. Each phase of the economic cycle is to be explained in terms 
of that which preceded it. Thus crises can be made intelligible only 
in view of their general industrial and financial antecedents. 

B. 125, 158. 

C. I. In view of the theory of the economic cycle do you regard 
the account of the causes of the panic of 1893 as presented by Lauck 
adequate? 2. What criticism can you make of Lough's criteria for 
sizing up an industrial situation ? 3. From the evidence presented in 
103-5 give an account of the general conditions out of which the panic 
of 1907 came. 4. What is the relation of capitalistic monopoly to the 
rhythm of business activity ? 



32 CURRENT ECONOMIC PROBLEMS 

D. I. Using the criteria of Lough, make a careful study of the 
industrial conditions preceding the panic of 1893. 

2. From all the available data which you can get together, what 
are your general conclusions about the "causes" of the panic of 1893 ? 
Were they industrial or financial? What criticisms of Lauck does 
your study lead to ? 

3. ''The period intervening between the end of one crisis and the 
beginning of another has four distinct stages: first, the depression 
proper; second, a season of steady improvement; third, a season of 
rapid improvement; fourth, a collapse." Are the four stages distinct ? 
Illustrate for the period from 1893 to 1907. 

4. "One of the fundamental conditions leading to a crisis is an 
improper balance between capital tied up in long-time and short-time 
processes." Show, by concrete examples, how tying up too large a 
proportion of capital in long-time investments tends to precipitate 
a crisis, 

5. From all the evidence at your disposal draw up a Kst of the 
general conditions out of which crises arise. Arrange these in the 
order of their importance. 

29. The Course of a Crisis 

A. Crises are alike and they are different. There is something 
of uniformity in the courses which they take; there is, also, much of 
individual variation. These characteristics can be best shown by a 
comparative study. 

C. I. Distinguish between panics and crises. 2. Compare the 
courses of the panics of 1893 and 1907. What have they in common ? 
What are their differences? 3. What modifications of Hadley's 
statement of the order of events in a crisis does your study suggest ? 

D. I. From the evidence contained in newspapers and financial 
weeklies make a study of the course of the crisis of 1873, 1893, or 1907. 

2. "The usual signal for the beginning of a crisis is a conspicuous 
banking, or mercantile failure. ' ' Shall we substitute the word ' ' cause ' ' 
for "signal" above? Shall we substitute "universal" for "usual"? 

3. Trace the prices of two safe and two risky stocks from the 
latter part of a flush period through a crisis into the succeeding 
depression. Explain, as clearly as you can, changes in prices. 

4. Show quite definitely how a crisis affects the activities and 
welfare of the laborer, the farmer, the manufacturer, the banker, the 
merchant, the exporter, the government employee, the professional 
man, the funded-income recipient, the real estate owner. 

5. "The characteristics of an acute crisis are loss of confidence, 
scarcity of cash, and high rates of discount." Should "panic" be 



PROBLEMS OF THE BUSINESS CYCLE SS 

substituted for "crisis"? Which of the characteristics mentioned 
are essential ? Which are mere symptoms ? 

30. Financial and Industrial Conditions during a Crisis 

A. No summary statement of financial and commercial condi- 
tions during a crisis is possible. In lieu thereof the contemporary 
material presented in the readings will suggest a few typical features. 
The outline picture presented can be rounded out by later study. 

C. I. Draw up a table of the various aspects of industrial and 
financial life mentioned in the readings. 2. Under each heading 
of your table state the conditions prevailing in 1893 and in 1907. 
3. From this evidence state the general conclusions you reach as 
to industrial and financial conditions in times of crisis. 

D. I. "During crises many producers have supplies of goods in 
excess of the demand for them." Exactly what does this mean? 
In what industries do you expect to find largest excesses ? Why ? 

2. By use of a graph trace the course of the rate on call loans on 
the New York market during the crises of 1893 and 1907. Similarly 
trace the course of the rate of exchange on London. 

3. "The rate of interest depends upon the demand for and supply 
of, not money, but capital." " During crises excessive rates of interest 
are paid, not for capital, but for money loans." Are these statements 
contradictory ? 

4. "A premium on currency, frequently quoted during crises, is, 
in reality, nothing else than a depreciation of bank deposits." Explain. 

5. "In the earlier stages of a crisis the investor is affected much 
sooner and to a much greater extent than the laborer." What makes 
the author think so ? Is he right ? 

6. Using the table of aspects of industrial and financial life which 
you have drawn up, make a detailed comparison of conditions during 
crises and flush times. 

31. Industrial Conditions during a Depression 

A. The depression has never received the attention warranted 
by the importance of its place in the cycle. Its literature is ver>' 
meager. Again we must attempt to extract from a few contemporary 
paragraphs an outline picture of its typical features. 

B. loi, 257. 

C. I. Distinguish between a crisis and a depression; a panic 
and a depression, 2. May any one of these occur independently of 
the other two ? 3. In 117 what items are taken as typical of general 
business conditions ? Why ? 4. Are the conditions mentioned in 117 



34 CURRENT ECONOMIC PROBLEMS 

as you would expect them to be in view of Mitchell's theory of the 
cycle ? 

D. I. Trace out quite carefully the transition from the crisis of 
1893 to the depression which followed it; the transition from the 
crisis of 1907 to the succeeding depression. 

2. Why are bank clearings and freight mileage taken as the best 
indicia of the state of industry in the country? Can you mention 
others equally good ? 

3. Trace out in graphical form the course of two railway and two 
industrial stocks for three months of a flush period and the course of 
the same stocks for three months of a subsequent depression. In a 
like manner trace out the rate on call loans. 

4. "During a depression the industrial machine seems to be half- 
stalled." What features of the depression suggest the analogy? Is 
it exact ? 

5. Using such materials as you can get together and applying 
the criteria you have formulated, determine at what point of the 
industrial cycle we are at the present time. 

32. Typical Theories of Crises 

A. Our study has, perhaps, already led to a tentative theory of 
the economic cycle. But, before putting it down in black and white, 
it is well to seek further light by examining the theories of crises 
which have been formally advanced. We cannot study all of them, 
for their number is legion. But the selections assigned present 
examples of the leading types. 

B. loi, 102, 144, 148, 203, 255. 

C. I. Separate the theories which make up this assignment into 
groups and give a name to each. 2. Make a definite statement and 
a critical analysis of each with the end of determining its validity. 
3. What other theories are suggested to you by the additional read- 
ings, by former assignments, or by your general reading? 4. Are 
there elements of these theories which you can incorporate into 
your explanation of the economic cycle? 5. Make a careful state- 
ment of your own theory of the economic cycle. 

D. I. Are crises most characteristic of non-industrial countries, 
thoroughly industrialized countries, or countries in process of in- 
dustrialization ? 

2. "The extension of the machine system is the primary cause of 
crises. It diverts more and more of our productive resources from 
the production of 'staples' to the production of 'specialties.' Thus 
more and more goods are produced for an uncertain and capricious 
market." Present this argument more fully. Can a similar argu- 



PROBLEMS OF THE BUSINESS CYCLE 35 



• 



ment be made for immigration ? In what other ways may the machine 
technique be regarded as a contributory factor in crises? How 
valid is the argument presented above ? 

3. "The cause of crisis Hes in the varying proportion which the 
capital devoted to permanent and remote investment bears to that 
which is temporarily invested." "The essential cause of a crisis is 
the rupture of the equilibrium between agriculture and industr>\" 
State the arguments leading to each conclusion. 

4. "Crises arise from the development of an inequality between 
future incomes and their present capitalized values." Explain, using 
a concrete illustration, just what this means. Does this suggest any 
theories previously discussed? Can this and the two statements in 
the preceding question be made parts of a larger and more compre- 
hensive theory? 

5. "All industry may be compared to carrying water to a central 
tank. The capitalists own the tank, the springs, the buckets, and 
all the implements. For every two buckets of water which the 
laborer carries to the tank he receives as wages one bucket of water. 
Under these conditions the tank must inevitably overflow, since 
capitalists can drink no more water than anyone else. When the 
tank thus becomes full, the capitalist will no longer hire the laborer 
to carry water. That is, all industry will cease. In other words, 
there will be a financial panic." What name is to be given to this 
theory? Wherein is the analogue imperfect? Wherein does the 
argument fail? 

6. "A vast outlay on enterprises involving a large consumption 
of present goods, whether in the way of pure waste or temporary 
unproductiveness, ought always to suggest a feeling of danger." Why? 

7. "The main cause of crises is the sudden realization of the 
insufficiency of capital to meet present demands." Connect the sud- 
denness of realization with the functions of the financial middleman. 

8. "The essential cause of crises is lack of confidence." But 
why is confidence eventually lost ? 

9. "Crises have no one sole and sufficient cause. They arise out 
of the economic situation as a whole." State, with adequate detail, 
why you agree or disagree with this statement. 

33. Credit and Crises 

A. From one point of view the industrial system is a vast and 
bewildering complex of present and future values. The maladjust- 
ment of these, owing to fallibility in prediction, is intimately connected 
with the rhythm in business activity. It is fitting, therefore, even if 
pecuniary institutions be beyond the horizon of our study, to dwell 



36 CURRENT ECONOMIC PROBLEMS^ 

• 
briefly upon the relation of credit, which mediates present and future 
values, to the business cycle. 

B. 28, 97, 98, 122, 123, 129. 

C. I. What is meant by the "cyclical demand for elasticity of 
credit" ? 2. Show, by example, how "emergency credit" reduces the 
stress of a financial crisis. 3. Can the possibility of the issue of 
"emergency credit" lessen the general rhythm of business activity? 
prevent rhythm altogether? 4. Compare the "national banking" 
and the "new currency" systems in respect to emergency elasticity 
of credit; emergency elasticity of note issue.- 

D. I. "Credit is a pecuniary instrument which mediates present 
and future values," Translate. What part does credit play in the 
rhythm of business activity ? 

2. "During the panic of 1907 the President of the United States 
allowed an evasion of a federal statute to prevent the failure of a 
large corporation. He permitted this corporation to be absorbed by 
a larger and financially stronger one." Could the necessity of absorp- 
tion be attributed to any feature of the contemporary banking system ? 
Was the act of the President defensible ? 

3. "The national banking system, which originated in 1863, was 
based upon the necessity of finding a market for government bonds." 
What particular problem confronted the government at that time ? 
How did the creation of the national banking system contribute to 
the solution of the problem ? What fundamental needs of anadequate 
credit system were overlooked ? 

4. "The national banking system was perfectly adapted to con- 
centrating cash and restricting credits." How did it concentrate 
cash? restrict credit? What relation has such concentration and 
restriction to the rhythm of business activity ? 

5. Would the establishment of a central bank eliminate the 
rhythm of business activity? Would it lessen it more than the 
"federal reserve" system is likely to do ? 

6. "The signing of the act creating the federal reserve system 
marks the end of the severe industrial and financial crises which the 
United States has experienced periodically in the past." Do you 
agree ? 

34. Control of the Industrial Cycle 

A. At last we reach the real problem of the business cycle. Is 
it desirable that an attempt be made to control the rhythm of business 
activity, and through it the pecuniary organization of society in its 
long-time aspects? If such control is desirable, is it possible? If 
possible, what are the proper ways and means? In formulating ar 
program, if such be attempted, let us not forget that it must have 
its basis in the theory of the nature of the cycle which our analysis 



PROBLEMS OF THE BUSINESS CYCLE 37 

has revealed. It must be grounded upon fundamental, not superficial, 
conditions. 

B. 34, 96-99, 257-. 

C. I. State as clearly as you can the fundamental conditions 
leading to the rhythm in business activity; the essential character- 
istics of the cycle. 2. Enumerate the "remedies," proposed in the 
readings or elsewhere, which merely "treat symptoms." 3. What 
proposals can be garnered from the readings for use in a program 
dealing with fundamental conditions? 4. Is the "severity of the 
trade cycle" a price which the United States must pay for rapid 
industrial development in the future ? 

D. I. "During periods of depression the government should 
confiscate savings which lie idle in banks, and use them for the con- 
struction of public works of permanent value. Such an expenditure, 
by increasing the demand for goods and labor, would hasten the 
return of business to normal conditions." What costs would the 
carrying out of such a proposal involve ? Would its results be worth 
the cost? 

2. Enumerate the costs which the Webbs overlook in their pro- 
posal of "the cyclical distribution of government orders." What 
effects would the application of their proposal have upon the pecuniary 
organization of society ? Would its results justify the cost ? 

3. "The most troublesome of the problems usually included under 
the head of 'unemployment' is inseparably connected with the busi- 
ness cycle." What have you learned about how the problem of 
"cyclical unemployment" cannot be solved ? Have you any positive 
suggestions to make for its solution ? 

4. " Crises and depressions together eliminate from the industrial 
world unsound business units. It is through them that the survival 
of the fittest becomes industrially effective." Do you agree ? 

5. " Crises and depressions are the price which a highly industrial 
state pays for its progress." Is this statement true? Can this and 
the statement above both be true ? 

6. "The slowing up of development within a nation offers no 
immunity from the disturbances originating in expanding industry-. 
Such slowing up is always accompanied by the export of capital to, 
and the import of securities from, the undeveloped parts of the world. 
Such parts are thus made an integral part of the national economic 
system, and disturbances originating there affect the domestic indus- 
trial system." Is this conclusion valid ? In its light criticize the two 
statements immediately preceding and the conclusions in 132 and in 
the last paragraph of the introduction to V. 

7. Formulate a program for securing a more adequate pecuniary 
organization of industrial activities, considered in their long-time 
aspect. 



VI. PROBLEMS OF INTERNATIONAL TRADE 
35. The Basis of International Trade 

A. We have studied at some length, both in their immediate and 
in their long-time aspects, the problems involved in the pecuniary 
organization of society. There remains for discussion the territorial 
limits of the pecuniary unit. Shall the industrial system be left free 
to organize itself on pecuniary lines, irrespective of local, class, group, 
or political interests ? Or, should such organization be subordinated 
to, or restricted by, such interests ? We can best begin this study by 
determining what basis there is for a comprehensive pecuniary organi- 
zation that transcends political and social lines. 

B. I, 32, 68, 97. 

C. I. Connect the problems of international trade with the 
problems of the pecuniary organization of society. 2 . Make a classi- 
fication of the advantages of international trade upon some other 
basis than that of importation and exportation. 3. Make an appli- 
cation of the law of comparative cost to the relations of individuals; 
of economic groups; of nations. 4. State, with illustrations of your 
own, the "theory of free trade." 5. Is the theory of free trade based 
upon the assumption of the perfection of the organization of society 
upon a pecuniary basis ? 

D. I. Why should an effort be made to place territorial rather 
than religious, cultural, or class restrictions on trade ? 

2. In a mediaeval sermon occur these sentences: "The third 
are such as are busied with trade ; we cannot do without them. They 
bring from one kingdom to another what is good cheap there, and 
whatever is good cheap beyond the sea they bring to this town, and 
whatever is good cheap here they carry over the sea." What theor}- 
of international trade underlies these statements ? 

3. "Trade is based upon differences in productive powers." 
Illustrate for both domestic and foreign trade. 

4. "International trade may be based upon differences in (a) 
natural resources, (b) technical-systems, (c) proportion between popu- 
lation and industrial equipment, (d) native capacities of the peoples, 
or (e) traditions of workmanship." Upon what other differences may 
it rest? Mention examples of trade resting upon each of these 
differences. Upon what differences does the trade between the United 
States and foreign countries rest ? 

38 



PROBLEMS OF INTERNATIONAL TRADE 39 

5. "International trade, based upon differences in relative supply 
of labor, is of diminishing importance." Why ? 

6. ''In Cuba the costs of producing olives and bananas are as 
7 : 3 ; in Greece they are as i : 19." Will trade between the two coun- 
tries pay ? Which will export bananas ? If Cuba has an advantage 
over Greece in the production of each of the commodities, will ex- 
change pay ? 

36. The Mechanism of International Trade 

A. The greatest source of confusion in popular discussions of 
foreign commercial poHcy is a failure to conceive of foreign trade as 
"exchange." This is due, usually, to an erroneous, or an inadequate, 
understanding of the mechanism of such trade. To give such an 
understanding as will serve for an intelligent discussion of tariff 
problems is the purpose of this section. 

C. I. Show, by illustrations of your own, how the use of "money" 
in domestic trade is reduced to a minimum. 2. Show how the same 
object is accomplished in foreign trade. 3. Are the adjectives "favor- 
able" and "unfavorable," as applied to trade balances, apt? Do 
they tend to encourage clarity of thought ? 4. Can there be such a 
thing as a " balance of trade " ? 5. Mention the principal " invisible " 
imports and exports. Why should we take particular notice of them ? 
6. Demonstrate the proposition that "international debts are usually 
paid in goods." 

D. I. "Economically considered, no distinction can be made 
between domestic and foreign trade." Prove. 

2. "A country gains from foreign trade, only on condition that 
its exports exceed its imports, in which case the balance is paid in 
gold." "A country gains from foreign trade, only on condition that 
its imports exceed its exports, in which case it gets more than it gives." 
In which statement dwells truth ? 

3. "Every year we pay millions to Great Britain for carrying 
goods between this and foreign nations. Think of it. Milhons on 
millions in gold coin have been transferred from our coffers to those 
of England. How long can we stand this ? " Do we pay England in 
gold for carrying our goods ? How do we pay ? Is it necessarily true 
that we should be richer if we built ships and carried the goods 
ourselves ? 

4. "A few towns in Germany produce more children's toys than 
the whole of the United States. This fact is greatly to Germany's 
credit, but it is very discreditable to us." Is it ? 

5. "I have it, on the authority of government statistics, that our 
losses in trade with South America, through an excess of imports 



40 CURRENT ECONOMIC PROBLEMS 

over exports, have exceeded the cost of the Civil War. The South 
Americans have thus received billions of dollars' worth of goods at 
our expense." Prove, by a similar argument, that we have obtained 
billions of dollars' worth of goods at England's expense. 

6. ''An importation of gold to pay for goods purchased here 
tends automatically to check itself." Demonstrate. 

7. "To the extent that the domestic market is wrested from 
foreigners and given to protected home producers, the foreign market 
is wrested from unprotected home producers." Demonstrate. 

37. The Demand for Local Protection 

A. The case for protection can be clearly appraised only when a 
clear distinction is made between valid social interests and the inter- 
ests of particular individuals, groups, or localities masquerading as 
social interests. A study of the demand for local protection serves 
to reveal the nature of the latter interests by revealing them un- 
masked. It has the added advantage of showing that, where the 
government cannot be used, there are many other social agencies 
which can be made to serve a pecuniary purpose. 

B. 134, 135, 138. , 

C. I. What function is erroneously attributed to money in the 
arguments for keeping trade at home ? 2. Are these arguments sound 
from the standpoint of the interested parties ? of communities repre- 
sented? of the larger industrial entity? 3. What valid arguments 
can be advanced in favor of patronizing home industries ? 4. Using 
an example which has come under your personal observation, write 
an essay upon "The Seen and the Unseen." 

D. I. "If Massachusetts were allowed to levy a protective tariff, 
it could add to its huge aggregate of industries a great banana indus- 
try.' ' Could Massachusets through protection build up a banana indus- 
try ? Would this constitute a net addition to the wealth of the state ? 

2. Before the adoption of the United States Constitution the 
state of New York levied a protective duty on firewood shipped 
into the state from Connecticut. Did it act wisely ? If there were 
no constitutional restrictions, would you expect the states of the 
Union now to levy protective duties against each other ? the towns ? 

3. "The imposition of restrictions on trade, either through govern- 
mental authority or the creation of popular prejudices, interferes with 
a thoroughgoing division of labor and the organization of industrial 
society on the most comprehensive plan." Do you agree ? 

4. "The inhabitants of small towns are short-sighted in patron- 
izing mail-order houses. There are some articles of imperative 
necessity which they must purchase from local merchants. Such 



PROBLEMS OF INTERNATIONAL TRADE 41 

merchants, with the whole of the retail trade of the towns, barely 
manage to maintain themselves. If, then, they are denied a part of 
this trade, they must eventually go out of business. Then the 
inhabitants of the towns will be put to sad shift for these necessities." 
Is this argument valid ? 

38. The Perennial Argument for Protection 

A. The individual, group, and local interests revealed in the 
last section are often conspicuously active in securing governmental 
restrictions on trade. How easy it is to translate particular into 
social interests, and how honored and venerable a large number of the 
arguments for restriction are, this section attempts to demonstrate. 

B. 5, 12, 19, 77. 

C. I. List the arguments for restriction advanced by the six- 
teenth- to eighteenth-century authorities; the arguments advanced 
by the twentieth-century authorities. 2. Strike out the arguments 
common to each list. What arguments have you left ? 3. Appraise the 
economic theory underlying each of the arguments advanced. 

D. I. "The principle of protection is sound, but under our 
conditions the national unit is too large for its efficient application. 
The South, which is just beginning to manufacture cotton, needs 
protection, not against the mills of Europe, but the mills of New 
England." Is this argument sound? What is the proper economic 
unit which should be protected ? 

2. "I believe in universal free trade by international agreement. 
But, if other countries are intent upon maintaining protection, it is 
only fair to ourselves to do the same." What is the great economic 
loss in having other countries shut out our goods? Can we better 
matters by shutting out theirs ? 

3. "A country has never been despoiled of its money by the 
working of its international trade" (Gide). Why does the author 
feel so sure about this ? 

39. The Case for Protection 

A. Despite the preponderance of local and particular arguments, 
the policy of protection has a comprehensive social basis. It is the 
purpose of this section to reveal this. It springs from a general dis- 
crediting of the theory of laissez-faire, a conception of society in 
developmental terms, and an abiding faith in the conscious control 
of industrial evolution. 

B. 50, 68, 135, 161. 

C. I. Compare the assumptions underlying List's argument with 
those of "free-trade" writers. 2. Under present conditions is List's 



42 CURRENT ECONOMIC PROBLEMS 

argument a defense of protection or of free trade? 3. Is the current 
validity of the "young-industry" argument practical or merely 
academic? 4. What attack does the argument that protection en- 
courages capital formation make upon the assumptions of the free- 
trade argument? 5. Make a careful appraisal of the assumptions of 
the argument for free trade. 6. Can protection alone secure the 
"industrial mobilization" necessary to national defense? 

D. I. " Through our policy of protection men have been induced 
to invest capital in enterprises which, under free trade, would be 
unprofitable. Since the government has encouraged such investments, 
^it must protect them." What name is given to this argument? 
"what current validity has it ? 

2. "A nation exporting grain in large quantities can profit tre- 
mendously through protection, which diverts labor and capital from 
agricultural to manufacturing industries. Because of the peculiar 
demand for grain, a smaller total product can be sold for a greater 
sum than a larger total product. By such diversion foreign nations 
can be made to bear the expense of newly created manufacturing 
industries." What conditions must be added to those enumerated 
above to make the conclusion valid ? 

3. "The protective tariff has the incidental advantage of forcing 
the foreigner to pay a large part of the cost of running the govern- 
ment." In general, are customs taxes paid by foreigners ? Can you 
point to cases in which they do pay them? In such cases do the 
duties yield protection ? 

4. "The argument against protection is that it diverts labor and 
capital from more productive to less productive industries. The 
obvious answer is that it creates the capital and induces the immi- 
gration of the labor employed in protected industries." Where 
lies the truth ? 

5. "Protection has served to convert a large amount of consump- 
tive into productive wealth, and has concentrated this in the hands 
of the class best fitted to secure the maximum returns from it." Do 
you agree ? 

6. "Protection may serve a useful purpose in conserving the 
natural resources of a country." How? Can it be made to waste 
natural resources ? 

7. " Protection may aid in the preservation of the health and vigor 
of a people through the maintenance of a proper balance between 
manufacturing and agriculture, between city and country." How? 
Can free trade be sued to secure such a result ? 

8. "The success of protection is contingent upon the generosity 
with which its favors are bestowed." Develop and appraise this 
argument. 



PROBLEMS OF INTERNATIONAL TRADE 43 

9. "Protection is a bulwark of national strength in time of war." 
"Free trade leads to a differentiation of functions between nations 
that acts as an insurance against war." Which argument is true? 

10. "Protection broadens and enriches our social life by diversi- 
fying our industrial system. It is an insurance against the cultural 
monotony which free trade fosters . " What validity has this argument ? 

11. "Protection must be as broad as the American principle of 
democracy. Let us not aristocratically protect a few favored indus- 
tries, for instance, sugar, steel, and rubber. Let us show our American 
spirit by placing duties upon all articles of import, and by this means 
let us enable every manufacturer, every farmer, every merchant, and 
every laborer throughout this fair land of ours, to receive a larger 
income and to enjoy a larger amount of the good things of life than 
he could were his industry not smiled upon by the beneficent rays of 
protection." Can it give to all more of "the good things of life"? 
This argument might be called " boot-strap aviation." Why ? 

40. The Influence of the Tariff on Wages 

A. The various influences exerted by the tariff on wages are 
implicit in the discussions of the arguments for free trade and pro- 
tection. However, because of the importance of the wages question 
in practical tariff controversy, the more important of them require 
separate presentation. 

B. 134, 135, 152, 153. _ 

C. I. What contradictions do you find in the wages arguments 
of the protectionists of 1824 and 1901 ? 2. Under what conditions 
does protection lower the rate of wages? 3. Does it lower wages by 
decreasing the price of labor or increasing the prices of goods ? 4. If 
protection leads to the formation of new capital, what effect does it 
have upon wages ? 

D. I. "In America the wages of labor are so high that one 
cannot make enough in manufacturing to pay them without protec- 
tion." "In America the high wages enjoyed by labor are due to the 
high protective tariff." Point out the contradictions between these 
arguments. Which is valid ? 

2. "Advocates of free trade assert that protection forces labor 
to work against nature rather than with it. If this be so, to obtain a 
given result a larger amount of labor will be demanded under protec- 
tion than under free trade. But, just because of this increased demand 
wages will be higher than under free trade." Would wages be higher 
if all land were stony ? if laborers were forced to work with one hand 
tied back of them? Point out the fallacy in the use of the term 
"demand" above. 



44 CURRENT ECONOMIC PROBLEMS 

3. "Wages are determined by the marginal productivity of labor 
within the economic entity. Accordingly, if two nations freely ex- 
change commodities with each other, the poorest opportunity for 
labor utilized in either of the nations will fix the rate of wages. What, 
then, must be the consequences of a free exchange of goods between 
the United States and China?" What confusion underlies this 
argument ? 

4. "The standard of living of American laborers is the highest in 
the world. The American wage, therefore, must be the highest paid 
anywhere. But since American entrepreneurs are forced to pay high 
wages, they must be allowed to sell their goods at high prices. To 
do this they must receive the benefits of protection." Point out the 
fallacies underlying this argument. 

5. "Under free trade natural resources are used most advanta- 
geously. Consequently the marginal productivity of labor is kept 
highest. It follows, therefore, that wages must be at a maximum." 
Is this sound ? 

6. "Under protection the amount of capital is constantly being 
increased. Consequently the marginal productivity of labor is con- 
stantly being raised. It follows, therefore, that wages must be at a 
maximum." Is this sound ? 

41. The Historical Setting of the Current Tariff Problem 

A. The examination of the conflicting theories of free trade and 
protection which we have just made is necessary to an appreciation 
of the issues involved in the current tariff problem. But, since we 
are not free to start our national experience anew, we are confronted 
by no simple alternative of free trade or protection. We are called 
upon rather to modify a highly complex and established tariff system. 
This problem calls for an understanding that can be obtained only 
by inquiring how our tariff system has become what it is. 

B. General Introduction, Part 2, 54, 233, 238. 

C. I. What part has protection played in the industrialization 
of America? 2. What forces were behind the Morrill tarifif act? 
What impress has it left upon our tariff policy ? 3. Account for the 
dominance of the idea of protection in the last part of the nineteenth 
century. 4. State as accurately as you can the current tariff problem. 

D. I. "During the Civil War the adoption of a comprehensive 
system of internal revenue taxation forced the adoption of very high 
import duties." Explain. After the war what changes were made in 
the system of internal revenue taxation? customs duties? What 
were the consequences ? 

2. "The development of American manufacturing upon a large 
scale was contingent upon either high prices for manufactured goods 



PROBLEMS OF INTERNATIONAL TRADE 45 

or an adequate supply of low-priced labor. Protection offered a 
fulfilment of the first condition; the open door to immigrants of the 
second." Which was chosen? Show as fully as you can the com- 
plementary nature of the two policies. 

3. " Because of a difference in circumstances the identical interests 
which in England have favored free trade have thrust the policy of 
protection upon the United States." How can this be? 

4; "In the future the struggle over the tariff will be less a matter 
of sectional issues, less a matter of contrary economic theories, and 
more a phase of the great struggle between democracy and privilege" 
(Brown) . What does the author mean ? Do you agree ? 

5. " For some time it has been evident that the future of American 
industry lies overseas. ,The European war has at last demonstrated 
that fact beyond peradventure." If so, what changes in attitude 
toward conflicting theories of the tariff may we expect from different 
industrial groups? What effects may we expect this to have on 
our tariff policy ? 

42. The Argument from Experience 

A. A historical approach to the current tariff problem involves 
of necessity a study of the "argument from experience." In addition 
to the light which it throws upon the present situation, such a study 
has the added advantage of revealing the very large number of inter- 
related antecedents in terms of which a "result" is to be explained. 
It is thus, incidentally, an object-lesson in economic causation. 

C. I. Analogous arguments show that prosperity is due to 
protection and to free trade. Explain the mystery. 2. Is American 
prosperity due to national protection or to free trade between the 
states? 3. What logical method underlies the "arguments from 
experience" ? Is it valid ? 

D. I. "With protection has come prosperity; protection is, 
therefore, the cause of prosperity." "With an increase in the number 
of suicides has come increased prosperity; suicides are, therefore, the 
cause of prosperity." Which argument is the more valid ? 

2. "America has been endowed with such rich stores of natural 
resources that not even the protective tariff could prevent unbounded 
prosperity." Is this argument usually advanced? Why not? Is 
it more or less valid than that in the first quotation in the preceding 
question ? 

3. "Free-trade tariffs in America have inevitably been followed 
by depressions." What historical instances are usually cited in 
support of this argument? Were the tariffs to which depressions 
were attributed free-trade tariffs? Is the chronology of legislation 



46 CURRENT ECONOMIC PROBLEMS 

and depression correctly stated ? What historical evidence is rejected 
in reaching the above conclusion ? 

4. Present a valid argument leading to the conclusion that 
protection has played an important part in the creation of our "highly 
pecuniary, industrial, and urban culture." 

5. "With complementary factors, protection has induced a gigan- 
tic, clumsy, and feverish development of manufacturing and mining; 
it has induced the inevitable attendants of this growth, urban life, 
city comforts, slums, poverty, vice; greater concentration of wealth, 
and class differences; a medley of races and a babel of tongues; a 
clash of political and ethical systems; an impotence to direct social 
development; and an overutilization of natural resources." Has 
protection caused development to proceed at too fast or too slow a 
pace? Has it imposed a disproportionate share of the costs upon 
the present or upon future generations ? Have its results been worth 
their cost ? 

43. The Impracticable Nature of Protection 

A. To become real the theory of free trade or of protection must 
be embodied in tariff schedules by Congress. Too frequently it is 
forgotten that Congress is not an accurate mechanism for translating 
policy into law. Hence the viewpoint, interests, and methods of the 
legislative body in themselves impart to tariff legislation many of its 
most salient characteristics. 

B. 137, 140, 144, 147. 

C. I. What technical knowledge is necessary to an understanding 
of tariff schedules? 2. The very nature of a tariff bill suggests that 
legislation is subject to what abuses? 3. How is the evidence upon 
which a tariff bill is based collected and digested ? 4. What impress 
is bicameral, committee, and conference action likely to leave upon a 
tariff bill? 5. Upon what logical principle are the conflicting interests 
of various sections and industries reconciled ? 6. Mention character- 
istic tricks of tariff-making. 7. Why was the selection upon "Tariff 
for Politics Only" included in the readings? 8. In view of the habit 
of tariff tinkerihg by Congress, can protection work in practice ? 

D. I. Trace, step by step, the course of a tariff bill, from the 
time it is drawn up by a committee of the lower House until it receives 
the President's signature. To what principles will a bill drawn in 
this particular way conform? 

2. Cite concrete evidence from the Underwood-Simmons bill 
supporting the conclusion that Congress is incapacitated to formulate 
tariff legislation. 

3. "The tariff is a local issue." How can this be ? 



PROBLEMS OF INTERNATIONAL TRADE 47 

4. "The popularity of protection is largely due to the opportunity 
which it gives for a display of the spirit of individual acquisition." 
"The protective tariff tends to the dominance of the entrepreneur 
viewpoint in poHtics." Explain the two statements. Are they 
connected ? • 

5._ "Protection is all right in theory, but it will not work in 
practice." Prove this proposition. 

44. The Scientific Revision of the Tariff 

A. Our present tariff system aims consistently neither at pro- 
tection nor at revenue. Nor, for the immediate future, is either 
objective likely to disappear completely. However, protection is 
likely to become less prominent, owing to the demand for markets 
"overseas," accentuated by the new, but dimly perceived, industrial 
conditions produced by the European conflict. It is more than 
possible, too, that the persistent demand for taking the tariff "out 
of politics" will find at least partial realization. 

B. 158, 159. 

C. I. How does a discussion of the tariff happen to involve a 
discussion of labor costs? 2. What influence is a tariff based on 
difference in "costs" likely to have upon the development of foreign 
trade? of domestic trade? 3. Can costs be determined accurately 
enough to serve as a basis for duties? 4. What advantages and 
disadvantages has a " tariff board " over Congress for tariff legislation ? 

D. I. "To accept differences in costs of production as a basis 
for tariff legislation is definitely to accept a policy of protection." 
Why so ? 

2. "If the principle of differences in costs as a basis for duties 
is consistently carried out, it must have for its objective national self- 
sufficiency." Why? 

3. Can one who favors basing tariff duties on differences in costs 
of production consistently vote for an appropriation for building an 
interoceanic canal, the object of which is to lower transportation 
charges ? 

4. What is the importance of making a distinction between the 
rate of wages per day and the labor cost per unit of product ? Men- 
tion other details of accounting which need consideration in any 
intelligent discussion of a tariff based upon "costs." 

5. "No true protectionist can favor a 'scientific' tariff. To place 
the protected manufacturer in a position in which he can make no 
more than in an unprotected industry neutralizes the advantages 
to be obtained from protection." Develop this argument in the 
light of "the case for protection." Is it valid? 



VII. THE PROBLEM«OF RAILWAY REGULATION 
45. The Fundamental Factors in the Problem 

A. For many years past the American people have been con- 
stantly confronted with the problem of railway regulation. The 
persistence of the problem has been equaled only by its changing and 
ever bewildering appearance. Each attempt to dispose of it seems 
only to have led to complications. In its development — for develop- 
ment it has had, rather than solution — the dominant theory of the 
relation of the state to industry has been of little importance. Its 
history has been very largely determined by the economic character- 
istics of the railway industry. With these, therefore, it is best to 
begin our study. 

C. I. What functions are performed by the transportation sys- 
tem in the organization of industrial society? 2. Is the magnitude 
of American railway interests a matter that is germane to a considera- 
tion of the problem of railway regulation? 3. What is the economic 
importance of ''the dual nature" of the railway corporation? 
4. What problems are associated with the monopolistic character of the 
industry ? 5. What problems grow out of "joint costs" and " dimin- 
ishing costs"? 6. Why cannot competition be depended upon to 
preserve a proper balance between the interests of the corporation 
and those of the public ? 

D. I. "It has been through the application of the machine 
process to transportation that society has been organized upon a 
pecuniary basis into a single comprehensive entity." Write a short 
historical sketch showing the part that transportation has played 
in the creation of the present economic order. 

2. "A stable organization of society upon a pecuniary basis 
requires stability and cheapness in transportation charges." Can 
this prime essential to economic order be secured under competition ? 
Why is it an essential ? 

3. Show by a hypothetical calculation which approximates the 
real facts how a 10 per cent increase in traffic may increase the profits 
of a railway corporation 200 per cent or more. 

4. Why should you expect the problem of "laissez-faire versus 
social control in America" to manifest itself first of all in connection 
with the transportation problem ? 

5. "Because the railway business is subject to the two economic 
principles of 'diminishing costs' and 'joint costs' it is necessarily a 



THE PROBLEM OF RAILWAY REGULATION 49 

monopoly." Show how, from this, there arise, inevitably, the prob- 
lems of protecting the public against the railroads and the railroads 
against the public. 

46. Discriminatory Practices of the Railroads 

A. In the economic characteristics of the railway industry just 
studied, discriminations have their chief source. Their presence 
constitutes the first clearly defined railway problem. Its importance 
lies, not so much in the effects of discriminations upon the railroads, 
as in their tendency to abridge opportunity and to create monopoly 
in the general industrial field, thus interfering with the competitive 
organization of society upon a pecuniary basis. 

B. 209-12. 

C. I. How does the very nature of the railroad industry force 
the traffic manager to secure additional business by rate concessions ? 
2. Enumerate and illustrate the early forms of discrimination; the 
later forms. Account for the differences. 3. How can discriminations 
affect the economic interests of corporations ? of regions ? 4. Wherein 
do discriminations present an economic problem? 5. How can dis- 
crimination in all its forms be extirpated ? 

D. I. If the traflSc of a railroad moves largely in a single direc- 
tion, is the railroad justified in offering to carry freight in the opposite 
direction at a lower rate ? 

2. "It is often quite profitable to charge a favored shipper a rate 
less than one which, if universally applied, would cause the railroad 
to carry on its business at a loss." How can this be ? 

3. "Discriminations find their exclusive source in the eonomic 
characteristics of the railway industry." "Because of the possibility 
of easily acquiring and disposing of shares of stock, either in railway 
or industrial concerns, of owning interests in companies selling sup- 
plies to or shipping over the railroad, and of speculating in real estate, 
railway officials are under the strongest pressure to grant rebates." 
Which theory of discriminations is true ? 

4. "Railway discriminations prevent competition from playing 
its part in organizing industrial society. They result in encroach- 
ments upon the interests of the non-favored shipper and of the public." 
Explain in detail. 

5. "Under a system of non-interference by the government, the 
railroads are at the mercy of large shippers. Government regulation 
is necessary to put them in a position to stop giving discriminations." 
How can this be ? 

6. Just what range of powers must the government assume, if 
it is to stop discrimination in all its forms ? , If the problem is thus 



50 CURRENT ECONOMIC PROBLEMS 

solved, will that be the end of the matter, or will the very solution 
have left a new railway problem in place of the old ? 



47. The Nature and Extent of Regulation 

A. It is interesting to trace how, in an attempt to reach the 
manageable elements in the railway industry, the administrative 
powers of the government have little by little been increased. It is 
interesting to note that with each increase in powers, the ultimate 
factors have escaped, calling for a new increase. Thus the problem 
of railway regulation has constantly reappeared in new forms and 
with increased complexity. 

B. 60-63. 

C. I . How many of the complaints made against the railway 
system in 1886 are valid today? 2, What particular problems led 
to the granting of the powers to the Interstate Commerce Commission 
whose provisions are separately enumerated in the readings? 

3. What particular powers were conferred in each of these grants? 

4. Is the record of the extension of governmental authority over the 
railroads complete ? 

D. I. Is the problem of the regulation of the railroads in any 
way complicated by the "division of sovereignty" between the 
federal and the state governments ? 

2. Enumerate the aspects of regulation which you regard i as 
infringements of the principle of freedom of contract. How are such 
infringements to be explained? 

3. By concrete examples show how unregulated railway rates 
may be made to absorb a surplus yielded by a protective duty; to 
yield a protection not afforded by the tariff; to neutralize the effect 
of a protective duty. 

4. ''Roughly speaking, the history of the relation of the govern- 
ment to the railroads can be divided into a period of favors antedating 
1870 and a period of restriction following that date." Why did the 
change in attitude come at that time ? 

5. Explain how it came about that the Interstate Commerce 
Commission was given power to prescribe and supervise the accounting 
systems of the railroads. Of what significance is this grant of power 
in the development of the railway problem ? 

6. Write a short essay showing, step by step, the occasions 
and the results of the extension of the power of the government 
over the railways,. What title is most appropriate to such an 
essay ? 



THE PROBLEM OF RAILWAY REGULATION 51 

48. Aspects of Rate-Making 

A. The question of rates is the epitome of all railway problems. 
The interests of competing shippers are involved in particular rates. 
The interests of shippers as a group and of the public, on one hand, 
and the railroads, on the other, converge upon the schedule of rates 
as a whole. The former is an aspect of the problem of industrial 
opportunity and the competitive organization of society. The second 
involves the problem of the railway as a monopoly. The importance 
of these problems necessitates a consideration of the theory of rate- 
making. 

B. 207, 208. 

C. I. Why do all railwaj^ problems converge in the question of 
rate-making? 2. Of what economic importance is the complicated 
technique of rate-making? 3. What part has competition in the 
making of particular rates? of schedules as a whole? 4. What is 
the correct theory of the particular rate ? of the schedule as a whole ? 
5. Make a careful appraisal of the rate theory of the Interstate 
Commerce Commission. 

D. I. Can the problem of the proper regulation of schedules of 
rates, as distinct from particular rates, be adequately dealt with so 
long as authority over rates is divided between the federal and the 
state governments ? so long as the groups of railroads over which as 
units shipments are carried remain independent corporations ? 

2. Is the principle of "charging what the traffic will bear" ade- 
quate for particular rates ? for schedules ? Is the principle of costs 
adequate for particular rates ? for ^schedules ? 

3. "The schedule of rates should be drawn in such a way as to 
result in such goods being carried, in such quantities, and for such 
distances as will yield the maximum of social utility." Explain in 
detail how, on this principle, a schedule of rates is to be established ? 

4. Quite recently the Interstate Commerce Commission has been 
called upon to pass upon increases in whole schedules of rates. Com- 
pare the problem involved in such a decision with that presented in 
passing upon individual rates. By allowing general increases what 
principles is the Commission establishing ? 

. 5. Show, by a short historical account, how the problem of deter- 
mining the general schedule of rates involves the problem of railroad 
valuation. 

49. Valuation of the Railroads 

A. It is an established principle that in prescribing rates a fair 
return must be allowed on the investment. The question of rate- 
making, particularly of whole schedules, involves, therefore, an 



52 CURRENT ECONOMIC PROBLEMS 

inquiry into the proper valuation of railroads for rate-making 
purposes. 

C. I. What sequence of events has led to the grant of power 
to evaluate the railroads of the country ? 2. Compare the respective 
merits of '' market value" and "physical value" as the basis of rates. 
3. Why may we regard ''franchise value" and "land value" as the 
real points at issue in the valuation of the railroads? 4. By what 
theory shall the value of railway land be determined? 5. Why does 
the valuation of railway property necessarily begin with the formu- 
lation of a theory? 6. Formulate an adequate theory for railway 
valuation. 

D. I. Railway property can be valuated for purposes of invest- 
ment, taxation, or rate-making. Should the procedure be the same 
in the three cases ? 

2. "The theory of physical value is adequate so long as we are 
dealing with buildings, construction work, and equipment. It is 
inadequate as a basis for the determination of land and franchise 
values." Why or why not ? 

3. "To take market value as a basis of rates is an argument in a 
circle." Why? Is it arguing in a circle to include in a valuation the 
land at its value to the railroad ? 

4. Does the interdependence of the railway systems and their 
schedules of rates in any way complicate the problem of railway 
valuation ? Is the problem more complicated in character, or merely 
of greater magnitude than that involved in evaluating municipal 
utilities ? 

5. Are the difficulties in valuation merely those of getting the 
initial values, or will it be exceedingly difficult to keep values up to 
date? Will a change in the value of money or the rate of interest 
affect the valuations determined by the Commission? 

6. "Two roads, the A.R. & Q., and the K.V. & W., connect two 
cities. The farmer runs through a prosperous section, carrying a 
large amount of local freight. The latter traverses a mountainous 
region, and is dependent largely upon through traffic. The initial 
cost and the upkeep of the latter road are much greater than those of 
the former. The Interstate Commerce Commission is called upon 
to determine rates between the two cities." Must the rate be the 
same for the two roads ? If its basis is cost on the former road, what 
will happen to the latter ? if cost to the latter, what to the former ? 
In this case who is entitled to the large revenues yielded by the 
former road ? Is it certain that the revenues will be as large as super- 
ficially might be expected ? What has this case to do with the practical 
problems of rate-making ? 



THE PROBLEM OF RAILWAY REGULATION 53 

50. Government Ownership of Railroads 

A. The question of the government ownership of railroads is not 
before the American people as an explicit issue. Tt is, however, 
implicit in the totality of conditions which characterize the develop- 
ment of the problem. When it comes, it will not be by deliberate 
volition, but because the path of regulation has led to the inevitable. 
But, even then, an end of the problem is not likely to be attained; 
for, under government ownership, new and unusual problems of 
railway regulation are sure to emerge. 

B. 221, 365, 370. 

C. I. Enumerate, in chronological order, the powers given to 
governmental authorities over railroads. 2. What further grants 
of power are implicit in the ends which the government is trying to 
accomplish? 3. Should the management of the railroads oppose 
government ownership ? the holders of railway securities ? 4. Com- 
pare the advantages and disadvantages of government and private 
ownership. Are they commensurable? Where lies the balance? 
5. If the balance is clearly against government ownership, does that 
promise an escape? 6. What can be learned from a study of the 
railway problem about the solution of economic problems in 
general ? 

D. I. "The prevention of discriminations involves allowing the 
government to supervise service, claims, and purchases." "To allow 
the roads to raise rates to yield a fair return on the investment, neces- 
sitates a supervision of investments by the government." Why? 
Just how will these extensions of powers bring the question of govern- 
ment ownership to the front ? 

2. "If regulation fails, the public will demand ownership; if it 
succeeds, the railroads will demand it." Is this dilemma a true 
explanation of the situation ? 

3. "A general theory is being developed to the effect that the 
government shall guarantee the railroads a fair return on a reasonable 
investment, and that it shall limit them to a fair return. The realiza- 
tion of this policy demands a manipulation of schedules of rates. In 
view of highly dynamic industrial conditions, a substitution of general 
for particular railway securities would greatly simplify the adminis- 
trative problem." Explain in detail. 

4. Draw up a plan by which the United States Railway Corpora- 
tion, a private concern, acquires the property of the several railroads 
of the country. 

5. Draw up a plan by means of which the United States govern- 
ment may acquire ownership of the railway properties of the 
countrv. 



54 CURRENT ECONOMIC PROBLEMS 

6. "Inasmuch as the transition to government ownership involves 
a substitution of government bonds for railway securities, it will 
amount in reality to a change in management rather than a change 
in ownership." Do you agree ? 

7. Sketch as clearly as you can the peculiar railway problems 
which are likely to appear under government ownership. Sketch the 
larger problems into which current railway problems are likely to 
be merged. 



Vin. THE PROBLEM OF CAPITALISTIC MONOPOLY 
51. Is Monopoly Inevitable? 

A. The railway, which we have just studied, is both a typical 
and the most conspicuous example of "natural" monopoly. Before 
addressing ourselves to the far more complicated problem of "capi- 
talistic" monopoly, it is well to try to obtain some idea of the age, 
the bewildering forms, and the extreme complexity of the monopoly 
problem. This can be done by raising the question of the inevitability 
of monopoly. 

B. IS, 174, 175, 361. 

C. I. How long has the monopoly problem been with us? Has 
it always been the same problem ? 2. Account for the persistence of 
the protest against monopoly. 3. List and classify all the forms of 
monopoly of which you know. 4. Make a clear distinction between 
monopoly and large-scale production. 5. Is there a real antithesis 
between the "natural" and the "artificial" explanations of monopoly ? 

D. I. " Typical examples of monopoly are corners, rings, patents 
of monopoly, pools, cartels, trusts, holding companies, ' Gary dinners,' 
interlocking directorates, 'communities of interest,' 'gentlemen's 
agreements,' closed shops, and codes of 'professional ethics.'" Ex- 
plain how each of these in some sense or other may be regarded as a 
monopoly. 

2. Would you classify as monopoly profits the rent of land? 
royalties from mines ? patents ? copyrights ? the wages of locomotive 
engineers? the salaries of corporation officials? the honoraria of 
opera singers ? the emoluments of college professors ? 

3. "The introduction of the machine necessitated large-scale 
production. Monopoly is merely the final step in this natural process." 
If the argument is logical, is it clear that monopoly is the final step ? 
Is the distinction between the business and the industrial unit of value 
in appraising the above argument ? 

4. "In course of time the principle of economy of operation will 
cause each industry to be organized as a monopoly; then combinations 
will be effected between the monopolies controlling the various stages 
in the production of a good; finally these combinations will be aggre- 
gated into one gigantic industrial concern controlling all industries." 
"Large-scale production is subject to the law of diminishing returns." 
Show how the principle just quoted can be made to dispose of the 
argument above, 

55 



56 CURRENT ECONOMIC PROBLEMS 

52. Conditions of Monopolization 

A. If we hope to bring monopoly under control and make it 
play its proper part in industrial development, we must understand 
its fundamental antecedents. Accordingly an answer to the ques- 
tion raised in the last section calls for a rather detailed study of the 
"conditions of monopolization." 

B. loi, 169, 179. 

C. I. What contributions has the machine technique made to 
monopoly? 2. Connect industrial development and "the business 
cycle" with "the failure of competition." 3. Write a chapter on 
"Incentives to Monopoly," for a book on the trust problem. 
4. What artificial incentives have encouraged the formation of 
monopolies? 5. What are the advantages to competing concerns 
of forming combinations? 6. What advantages and disadvantages 
are there to the general public in combination? 7. Is monopoly 
inevitable ? 

D. I. "The institution of capitalistic monopoly is new; its 
life-history is not as yet fully revealed; our experience is limited; 
and our view is too close for perspective. Therefore we are ill pre- 
pared to pass upon the nature of monopoly." Develop this argu- 
ment in detail. Do you accept it? Even if you do, does it justify 
a laissez-faire policy relative to monopoly ? 

2. "The introduction and extension of the machine process and 
the pecuniary organization of society, which is its necessary comple- 
ment, are the two principal antecedents of capitalistic monopoly." 
Explain this argument. Even if true, does it follow that the machine 
process and the pecuniary organization of society are inseparable 
from monopoly? 

3. "The higher the rate of industrial development, the greater 
the tendency toward monopoly." Prove or disprove. 

4. "Peculiar industrial conditions determine that in one line 
there shall be monopoly and in another not. Typical of these are 
inelasticity of demand, loss of identity by an article before it reaches 
the consumer, production in a stage of increasing returns, the possi- 
bility of grading an article to appeal to different social classes, and the 
localization of the supply of an essential raw material." Explain, by 
concrete examples, how these conditions have contributed to the 
maintenance of various monopolies. 

5. "The incentive to monopoly is financial. Large profits are 
made by the promoters of combinations. In addition the combina- 
tion has a value higher than the aggregate of the values of the separate 
establishments." Explain each of these incentives. Does this 
argument contradict those enumerated above ? 



THE PROBLEM OF CAPITALISTIC MONOPOLY 57 

6. ''Monopoly is due to 'artificial conditions.' Among these are 
'the cencentration of cash/ 'the restriction of credits,' the fickleness 
and special favors of the tariff, and the clever manipulation of 
railway rates." Explain how each of these has contributed to the 
maintenance of monopoly in particular fields. Which of them do 
you regard as general "causes" of monopoly? 

7. "Agreements not to cut prices are necessary to secure the 
large profits made possible by a generous protective duty." Why? 

8. Enumerate and classify the conditions of monopolization. 
Weight the conditions enumerated according to their importance. 

53. The Influence of Monopoly on Price 

A. Price is the immediate point of contact between the monopoly 
and the public. Through price, too, the monopoly produces some 
of its most important industrial effects, such as the restriction of 
competition and the concentration of the control of production. It 
is natural, therefore, that price is the focus of the more immediate 
and obvious of monopoly problems. 

B. 76, 195. 

C. I. Show by a schedule of your own how monopoly price is 
usually fixed. 2. Is monopoly price necessarily higher than competi- 
tive price? 3. Why may we usually expect to find monopoly price 
somewhat lower than your calculation would indicate ? 4. Explain, 
with concrete examples, "class price." 5. Is monopoly price likely 
to vary from place to place ? 

D. I. "The greater the elasticity of the demand for commodities 
controlled by monopolies, the lower will be the price that yields the 
maximum profit." Illustrate by the use of schedules. 

2. "Since our means are limited, we cannot satisfy all our wants. 
The latter, therefore, compete for satisfaction. This causes a com- 
petition between the unlike goods which satisfy these wants. Accord- 
ingly, even though controlled by monopolies, the prices of goods are 
always determined under competitive conditions." Defend or attack 
this argument. 

3. Why are goods of domestic production quite frequently sold 
abroad cheaper than at home ? Is monopoly a necessary antecedent 
to such differences in prices ? 

4. Should producers be given the power to determine the prices 
at which retailers may dispose of their goods ? What is the practical 
importance of this problem of " the maintenance of prices" ? 

5. "The Caesars and Napoleons are no longer found on the 
tented field, but in the gilded palaces of finance. One week a rail- 
road magnate gives a million dollars to a hospital, and the next the 



58 CURRENT ECONOMIC PROBLEMS 

Interstate Commerce Commission is applied to for permission to 
raise rates lo per cent, thus threatening an increased cost of living, 
bringing with it increased poverty and misery in a million homes." 
Point out the fallacy. 

54. Types of Unfair Competition 

A. If unrestrained, industrial, like railway, corporations are 
prone to resort to "unfair" methods of securing business. These 
tend to disturb relative competitive advantages, to foster monopoly, 
and to interfere with the competitive organization of industry upon 
a pecuniary basis. 

B. 74, 169, 177, 180. 

C. I. Classify the types of "unfair" competition mentioned in 
the readings. 2. Show, by examples, the relation of the nature of the 
industry to the types of unfair competition used. 3. Enumerate 
the economic incentives to unfair competition. 4. By what ethical 
standards are the practices mentioned pronounced "unfair"? Are 
these standards to be accepted ? 

D. I. Make a careful and detailed contrast between the incen- 
tives to railway discrimination and to " unfair " industrial competition. 
Make a similar contrast between the results of the two. 

2. "The ultimate objective of unfair methods of competition is 
monopoly." Explain. 

3. "The unfair methods once used by the great corporations were 
an expression of the contemporary spirit of extreme individualism 
in business. They were an inevitable complement of the social phi- 
losophy of a generation ago." Are such methods a thing of the past ? 
What problems in ethics does this quotation raise ? 

4. "The competition of industrial establishments, of which 'un- 
fair' practices are but a superficial manifestation, vindicates itself in 
concentrating the industrial property of the country in the hands 
of those best fitted to manage it. It has the incidental advantage of 
encouraging the formation of large aggregates of new capital." Give 
the argument leading up to each of these conclusions. Are they 
valid ? 

5. "The theory of the state has been that industrial justice to the 
conflicting interests of producers and consumers, as well as to rival 
producers and rival consumers, inheres in a scheme of prices estab- 
lished under competition. The presence of monopoly, therefore, 
interferes with distributive industrial justice." Explain in detail 
this "legal presumption." Show the seriousjiess of the ethical and 
legal problems which follow the imperfect action of competition as 
an organizing force. 



THE PROBLEM OF CAPITALISTIC MONOPOLY 59 

55. The Government and Monopoly 

A. To suppress or control monopoly, we have, of course, placed 
our primary reliance in the government. The history of its attempts 
is marked by two principal characteristics: first, a policy aiming at 
the restoration of competition and a determination of its plane; 
secondly, the reappearance of the problem in new guise after each 
attempt at solution. 

B. 181-85, 195- 

C. I. Show, by examples, the value which a change in the form 
of business combination has in eluding the law. 2. Is this process of 
change of form at an end? 3. What was the intent of the Sherman 
act? 4. Is the theory underlying it sound? 5. Enumerate its most 
important provisions. 6. Appraise the efiicacy of its mechanism in 
the light of the dissolution of the Standard Oil Company. 7. What 
was the occasion for the Trade Commission and Clayton acts? 
8. Will their enforcement provide a satisfactory solution of the trust 
problem ? 

D. I. "The contest between law and combination, manifested 
in changing forms of organization, has resulted in a reduction of the 
problem of monopoly to its lowest terms, and a clear statement of 
the issue involved." State the issue as clearly as you can. 

2. "The history of trust legislation represents an attempt to 
restore competition and to regulate its plane." Which object is 
dominant in the Sherman act? the Trade Commission act? the 
Clayton act? 

3. Defend or attack the justice of the " threefold damage" clause 
of the Sherman act. 

4. Write an argument defending or attacking the Supreme Court 
for writing the word "reasonable" into the Sherman act. 

5. Present, as clearly as you can, the issues involved in the 
antithetical proposals of the regulation of monopoly and the regu- 
lation of competition. 

56. The Social Problem of Monopoly 

A. The monopoly problem has usually been considered only in 
its more immediate aspects. As a result there has been no satisfactory 
accounting of the relative values and costs of monopoly and compe- 
tition. Equally striking is a failure to take account alike of the more 
ultimate results to which the antithetical policies may lead and a 
disregard of the larger social and non-pecuniary elements involved 
in the problem. 

B. 74, 105, 195, 253, 364. 



6o CURRENT ECONOMIC PROBLEMS 

C. I. What are the costs and values of competition? 2. What 
are the costs of regulated monopoly? What are its social values? 
3. What tendencies would competition and monopoly severally im- 
part to the development of industrial society ? What is the ultimate 
end toward which each aims ? 4. Outline a just and adequate trust 
policy. 

D. I. ''A policy of regulated monopoly may be expected even- 
tually to lessen the rhythm of business activity." Support or attack. 

2. ''Monopoly removes the incentive to initiative, displayed alike 
in personal efficiency, improved organization, and advance in tech- 
nique." "Monopoly, by insuring economic security, will cause the 
instinct of workmanship to take the place now occupied by the spirit 
of individual acquisition." Where lies the truth ? 

3. "Even if it be true that in certain lines of production the 
tendency toward concentration is too strong to be checked, neverthe- 
less it would be unsafe for the government to lay down any policy 
other than that of restoring competition and determining its plane." 
Why or why not ? 

4. Explain the result that monopoly is likely to have upon the 
stratification of society, the concentration of wealth, the distribution 
of industrial opportunity, the relative size of incomes, the nature of 
educational advance, the realization of political democracy, the nature 
of social development. What have these, and kindred questions, to 
do with the monopoly problem ? 

5. " The matter at issue is a question, less of the relative 'economy' 
of monopoly and competition than of the kind of economic organiza- 
tion best calculated to give us the kind of society we want" (Young). 
Explain fully. Show the connection of this with other problems which 
we have discussed or are going to discuss. Can the m.onopoly 
problem be solved in isolation, or must it be considered as a part 
of a social program ? 



IX. THE PROBLEMS OF POPULATION 
57. The Question of Numbers 

A. Quite different in character, yet intimately associated with 
the problems of economic organization just considered, are those 
which have to do with the welfare of the classes which make up the 
"economic order." Of these the most obvious and the most funda- 
mental is the problem of population. It is well to begin our study 
of this subject with the "problem of quantity" stated in its simplest 
terms. 

C. I. With what other economic and social problems is the 
question of population directly and indirectly concerned? 2. Show 
the fundamental dependence of general and class welfare upon the 
ratio of population to resources. 3. Account for the early appraisals 
of population given in the readings. 4. Explain the changing value 
placed upon a large population in America. 

D. I. Which of the following can be explained in terms of the 
ratio of population to economic resources: the exodus from Eden? 
the attempt of the Helvetians to move out of their boundaries into the 
Roman province ? the invasion of England by the Angles, Jutes, and 
Saxons ? the practice of infanticide among certain primitive peoples ? 
the survival of polyandry in Thibet ? 

2. "Some of the most important crises in social development 
have been associated with a sudden change in the ratio of population 
to resources. Among these may be mentioned the Black Death, 
which reduced population; the economic discovery of America, which 
increased resources; and the Industrial Revolution, which through 
a superior technique practically increased resources." Explain the 
significance of each of these changes. 

3. Give a rational explanation of the high value set upon a large 
population by the writers of the Old Testament. Is there any con- 
firmation of this explanation in recent events in Europe ? 

4. "Children may be to their parents either assets or liabilities." 
On this basis explain the changing American attitude toward a large 
population. 

5. "Children are the property of the poor." Does this explain 
the attitude of the industrial class toward the size of the family. 
How are the attitudes of the leisure, business, and professional classes 
to be explained ? 

61 



62 CURRENT ECONOMIC PROBLEMS 

6. The law of population and the law of diminishing returns 
have together given to economics the title of "the dismal science." 
Why? 

58. The Malthusian Theory 

A. The quantitative Iheory «rf population is inseparably 
associated with the name of Malthus. A clear understanding of it 
necessitates attention to its original statement, its criticism, its 
development, and its presence in current economic problems. 

B. 36, 45, 233, 375. 

C. I. Is there any essential connection between the social crisis 
of his day and Malthus' theory of population? 2. State and criti- 
cize the theory of population as stated by Malthus. 3. Has the rate 
at which population increases anything to do with the validity of the 
principle? 4. Distinguish between the teachings of Malthus, the 
Malthusians, and the neo-Malthusians. 5. In what proposal does 
neo-Malthusianism find its most conspicuous current expression? 
6. What current arguments associate Malthusianism with capitalism ? 

D. I . " In the animal world the usual condition is an equilibrium 
between numbers and food-supply." "Human history has been 
marked by a succession of planes, on each of which there was for a 
time a tendency toward an equilibrium between population and 
economic resources." Explain each statement. Why is the expres- 
sion "a succession of planes" used in the second ? 

2. According to the most reliable evidence, the population of 
England at various dates has been as follows: 1086, 2,000,000; 1348, 

/ 4,000,000; 1377, 2,000,000; 1700, 5,500,000; 1750, 6,467,000; 1770, 
7,428,000; 1790, 8,675,000; 1811, 10,164,000; 1861, 20,066,000; 
1891, 29,900,000; 1901, 32,527,000; and 1911, 34,045,000. Explain 
the changes in population indicated by these figures. Account for 
the rapid increase in population in modern England. 

3. Compare the work of Malthus with that of Darwin in method, 
in conclusions, in attitude toward social refor,pi, and in influence 
upon social reform. Which, if either, is animated the more by the 
spirit of laissez-faire? 

4. "Each mouth that is brought into the world brings two hands 
with which to fill it." Does this annihilate the Malthusian theory? 

5. "During the nineteenth century population increased at an 
unprecedented rate. Yet, at its close, the standard of living was 
higher than ever before." Does this prove the non-operation of the 
law during this century? 

6. "The standard of living is the result, not of one, but of many, 
causally independent factors. Among these are the quantity of 
natural resources, the changes in the volume of capital, the develop- 



THE PROBLEMS OF POPULATION 63 

ment of technology, and the changes in population. These cannot 
be reduced to a single economic formula. It is accordingly best to 
regard the law of population simply as the tendency of numbers 
to increase." Justify this statement of the law. 

7. "Since man is a rational being, the very statement of the 
Malthusian theory was one cause of the defeat of its own prophecies." 
State the newer "voHtional" theory of population (Hobhouse). 

8. "If population is not uniformly checked by all classes, it is 
necessary that we have a stratified society, based on property and 
inheritance. That alone will save the privileged classes from the 
penury and woe which, without stratification, would be the lot of all." 
What vaHdity has this argument? What relevancy has it to the 
proposition to adopt socialism ? 

9. "Differences in the rates of increase within the several social 
classes of a country are more significant than differences in the rates 
of increase in different countries." What social problems does the 
former affect ? the latter ? 

59. The Coming of the Immigrant 

A. At present the question of the quantitative control of popu- 
lation appears in two problems, that of "birth-control" and that of 
immigration. The former is largely a matter of voluntary social 
conventions, the latter of governmental action. Each can be made 
a reflection of the social judgment as to the quantity of population. 
The issue, however, in connection with the former is likely to be lost 
in considerations of individual welfare; and in the case of the latter 
to be confused by the introduction of ethnic, religious, political, and 
cultural questions. 

B. 39, 57- _ , 

C. I. What significance does the fall in the native birth-rate 
give to the problem of immigration? 2. What is your reaction to 
the account of the "immigrant invasion"? 3. What importance 
attaches to the rate of immigration? 4. Of what value are the 
American appraisals of immigration? 5. State the quantitative 
problem of population as implicit in the immigration problem. 

D. I. To the proposal to equalize property as a means of 
abolishing poverty Aristotle interposed the objection that it would 
prove unworkable unless the state exercised a control over the growth 
in numbers. What must have been his line of argument? What 
relevancy has it to current problems ? 

2, " Population should increase more slowly than natural resources 
and technical advance if progress is to be made." Apply this to the 
immigration question. 



64 CURRENT ECONOMIC PROBLEMS 

3. ''The principal incentive to migration is differences in wages 
and standards of living." Why has immigration from Northern 
Europe to the United States practically ceased ? Why do our immi- 
grants come so largely from Southern Europe ? May we expect such 
immigration to cease in course of time? Explain. 

4. "Presently the world will be cut up with immigration barriers 
which will never be leveled until the intelligent accommodation of 
numbers to resources has practically equalized population pressure 
all over the globe" (Ross). Is this prediction likely to be realized in 
the immediate future ? 

5. "One needs but compare population pressure in various coun- 
tries today to realize that the real enemy of the dove of peace is not 
the eagle of pride or the vulture of greed but the stork" (Ross). 
Argue for or against population pressure as the primary incentive 
to war. 

6. " Social policy demands an increase in population ; the interests 
of native Americans is best served through race suicide. The neces- 
sary result of this antithesis is a peopling of America with foreign 
stocks." How is the antithesis to be solved otherwise ? Is it a real 
antithesis ? 

60. Immigration and Industrial Development 

A. The increase in the number of laborers through immigration 
has been one of the complementary conditions which together have 
produced our highly pecuniary, industrial, and urban culture. This 
culture, in its manifold aspects, would have been impossible but for 
immigration. 

B. 61, 161, Introduction to VI, 255. 

C. I. Enumerate and appraise our industrial debts to the 
immigrant. 2. In our industrial development why may protection 
and the open door to the immigrant be looked upon as complementary 
forces? 3. Enumerate other factors which have contributed to the 
result. 4. Can responsibility be quantitatively apportioned among 
these factors ? 5 . On the whole has immigration contributed a net 
value or a net cost to American culture ? 

D. I. "The protective tariff creates a demand for certain kinds 
of labor at the same time that it destroys the demand for certain 
kinds of foreign goods" (Hall). Do you know of a concrete case 
where it has furnished this incentive to immigration ? 

2. "The nature of our expanding industrial system, especially 
the use of machinery, has determined to a large extent the character 
of the immigrants whom we have received." Explain, citing concrete 
evidence. 



THE PROBLEMS OF POPULATION 65 

3. "'Birds of passage' perform the highly important function of 
adjusting our labor supply to our labor needs." Is this sound? 

4. "Immigration has brought us a body of adult laborers. Thus 
the expenses of the years of dependence have been borne by foreign 
countries. We receive the net benefits." Do you agree ? 

5. "Immigration has contributed greatly to our prosperity by 
supplying us with a multitude of goods at very cheap prices." 
Explain. 

6. Answer for immigration the questions asked about protection 
in problem 5 in section 42, above. 

7. "Immigration has encouraged a dense population congested 
in cities and crowded in factories and mines. But is it certain that 
it is a more ideal social aggregation than a community of prosperous 
farmers?" (Fetter). 

61. Immigration and Labor Conditions 

A. The fact of immigration is written large in every aspect of 
our industrial society. The problem of immigration bears directly 
or indirectly upon all our social problems. Yet its most immediate 
and direct connection is with the working conditions, wages, and 
standards of life of our industrial laborers. 

B. 27, 255, 273. 

C. I. Is immigration the cause of the disappearance of the ideal 
living conditions enumerated by Dickens? 2. Make a careful study 
and write a criticism of the logic underlying the conclusions in 235 
and 236. 3. Has immigration forced the native worker up, down, or 
out? 4. Show, quite explicitly, how immigration has affected some 
four or five industrial conditions. 5. If the door be kept open to 
immigrants, can unionism thrive? 6. Has the immigrant been to 
the native laborer a help, a goad, or a menace ? 

D. I. "Immigrants, being mobile and migratory, aid in adjusting 
the supply of labor to the actual demand, thus lessening the rhythm 
of business activity." "The immigrant invasion has caused a larger 
and larger part of the labor force of the country to be invested in the 
production of goods, the demand for which is precarious, thus accen- 
tuating the rhythm of business activity." Where lies the truth ? 

2. "Immigrants settle in the cities, thus disturbing the balance 
between urban and rural industry. Maldistribution of labor, rather 
than immigration, is responsible for low wages, unemployment, and 
the extreme rhythm in business activity." Do you agree? 

3. "Like machinery, the immigrants have reheved native laborers 
of heavy and disagreeable toil, and have elevated them to an aristoc- 
racy of labor." Is the analogy correct? 



66 CURRENT ECONOMIC PROBLEMS 

4. "Immigration has not increased the American population. It 
has merely resulted in a substitution of alien for native stock." Has 
immigration increased the total population? Has it lowered the 
native birth-rate? 

5. "A careful statistical study of immigration and wages in the 
last few years shows that immigration has raised wages." "Because 
of their lower living standards immigrants will accept wages far 
lower than natives. Thus immigration lowers wages." Show the 
incorrectness of both of these arguments. 

6. "So long as a cheap and seemingly limitless labor market lies 
open, it is impossible to standardize working and living conditions." 
Why or why not ? 

7. "Let the foreigners come in! No American laborer need fear 
the competition of a laborer from any part of the world. In any 
line of work the American is a match for a man of any other nation." 
Admitting the truth of the last statement, may it still be to the 
laborer's advantage to exclude the foreigner ? 

62. The Further Restriction of Immigration 

A. Inevitably we come to the question of "what are we going 
to do about" immigration. As we have found, the quantitative and 
the qualitative aspects of the question are inseparable. It is well, 
however, to consider first proposals of an immediate nature, which 
grow primarily out of the quantitative aspects of the problem. 

B. 231, 280. 

C. I. In what respect does immigration present a problem 
because of numbers ? standards of living ? thrift ? 2. Why do most 
of the proposals for restriction take a qualitative form? 3. State 
the "pro and con" of the literacy test? 4. Name a simple test, 
easily administered, which would better meet the requirement of 
quantitative restriction ? 5. Show concretely what is involved in an 
immigration program. 

D. I. "Employers favor immigration for the reason that they 
favor large families among the poor. They favor immigration for 
the reason that foxes favor large families among rabbits." Is this 
fair ? Is it adequate ? 

2. Can you reconcile a "tariff for the protection of American 
labor'' with an open door to immigrants ? Why do those who favor 
the first policy favor the second ? 

3. "Whether, for quantitative reasons immigration should or 
should not be restricted, depends upon whether the country considered 
as a whole is in a stage of increasing or diminishing returns." Com- 
plete the argument. Is it as simple as this ? 



THE PROBLEMS OF TOPULATION 67 

4. Discuss the merits and defects of the plan to restrict immigra- 
tion by imposing a high per capita tax upon the immigrant. 

5. "If a blanket tax of $100 was imposed upon each immigrant 
with the privilege accorded him of going to any place in the country 
at government expense, the maldistribution of labor would be righted 
and the immigration problem would disappear." Are you so sure of it ? 

6. ''One of our most distinguished citizens has again been taking 
the country to task for race suicide. Admitting his contention that 
our families should be larger, it is likely that a prohibition of immi- 
gration would achieve the end he has in view." Trace the steps by 
which the author of the above quotation probably arrived at his 
conclusion. 

7. "Wages might be raised permanently by forcing American 
employers of foreign laborers to pay them a minimum wage of three 
dollars per day during their first ten years in this country. This 
would amount virtually to a protective tariff upon American labor." 
Discuss. 

63. Immigration and Our Future 

A. The qualitative problem of immigration, inseparably asso- 
ciated with that which we have just studied, contains implicitly all 
the problems of our social order. Properly to approach it we must 
determine the kind of a society we wish to produce and the possible 
contributions which alien stocks can make to that culture. Then we 
must formulate a program which will secure immigrants from proper 
stocks and in proper proportions and will give them the training 
necessary to enable them to make these contributions. Thus the 
immigration problem loses its identity in that of the conscious control 
of social development. 

B. Introduction to III, 54, 55. 

C. I. State the economic problems demanding an "immigration 
program." 2. Can the economic problems of immigration be con- 
sidered in isolation? 3. Has the "transitional quaHty" given to our 
social order by the immigrant been for the better or the worse? 
4, What is the proper place for the immigrant in the American 
culture of the future ? 

D. I. "The question at issue is not the personal or racial 
characteristics of the immigrants. These are immaterial. Personally, 
I care not if they come from heaven possessed of the divine attributes 
of angels. There are too many of them." Is this argument apropos 
of the issue ? 

2. "Since the immigrants are eventually to constitute an indus- 
trial proletariat, unrestricted immigration encourages the concen- 
tration of wealth and the stratification of society on a pecuniary 



63 CURRENT ECONOMIC PROBLEMS 

basis." "If cheap labor lowers the cost of production, in obedience 
to the laws of value price falls. Thus the benefits go to the consumer. 
Immigration, therefore, can encourage neither the concentration of 
wealth nor the stratification of society on a pecuniar}^ basis." Which 
argument is sound ? 

3. Life once published a photogravure of a frieze supposed to 
have been discovered in the ruins of New York City in the thirtieth 
century. It represented an American Indian denied a place in the 
sun by a Dutch trader; the Dutchman removed in the same way by 
an Englishman; the Englishman by a Yankee; the Yankee by an 
Irishman; and the Irishman by a Hebrew. At this point the frieze 
broke ofl[ abruptty. Is this a true statement of the law of racial 
survival? 

4. "Because all property eventually comes to market and is 
knocked down to the highest bidder, and because disregard of con- 
ventional standards of expenditure makes a capitalist out of the 
immigrant, the economic race is always to the newcomer." What 
evidence have you of the displacement of "native American'' property 
owners by aliens? Just what part is this "law" likely to play in 
determining the future of the immigrant in America ? 

5. "The immigrant must remain a permanent proletarian, for he 
is coming too fast to be Americanized by our machinery for assimila- 
tion." Does this statement come nearer giving a picture of the 
immigrant's future than that above ? 

6. "Let the immigration problem alone. In God's good time it 
will settle itself." Show that this is true. How will it settle itself ? 

7. "Immigration has induced a development of society at a 
faster rate than we could control it. It is responsible for the acute 
form which many of our social problems take." Give concrete evi- 
dence supporting this statement. Will a solution of the immigration 
problem render others less acute ? 

8. "The real problem in immigration is that of the kind of 
society we want America to be." Explain. 

9. In view of both its short-time and its long-time aspects, formu- 
late an adequate immigration program. 

64. The Quality of Population 

A. The problem of eugenics involves the same baffling questions 
as that which we have just studied. We may say quite positively 
that certain classes should be inhibited from reproduction. To say 
what classes and types should reproduce, and in what propor- 
tions to each other, involves the formulation of a comprehensive and 
adequate social philosophy. 



THE PROBLEMS OF POPULATION 69 

B. 37, 39, 248._ 

C. I. Of what importance is it to society to Control the birth- 
rates of its several classes ? 2. Is reform through eugenics antithetical 
to reform through changes in social environment ? through education ? 
3. Can the biologist produce a social Utopia? 4. What effect will 
immigration have upon the quality of our population? 5. Show 
that the problems of eugenics are social rather than merely biological. 

D. I. Enumerate the classes or types which unquestionably 
should not be allowed to reproduce; the classes or types about which 
there is question. Would you include those afflicted with tuberculosis 
in the first class ? 

2. "Eugenics is a pseudo-reform urged by conservatives, who 
are opposed to institutional and environmental changes, as a means 
of countering the attack of radicalism." Is reform to be effected by 
changing the "environment" or improving the "population" ? How 
long have different reformers advocated these different measures? 
Is the charge above true ? 

3. At present we have many social conventions and inhibitions 
prescribing the conditions of marriage in the upper and middle 
classes in society. We are beginning to have such conventions 
relative to the number of children. Enumerate these conventions 
and show how through them society is exercising much control over 
its population. Can similar conventions be established among the 
industrial workers ? 

4. "The problem of positive eugenics turns upon the question. 
For what are we breeding ? That, in turn, is based upon the ques- 
tion, What kind of a society are we trying to develop?" Explain. 

5. "However smiling the gardens of Daphne, they had always 
to slope down into the huge malodorous quagmire of wretchedness" 
(Ross). Is inability to control population the serpent that will 
forever exclude us from a social Eden ? 



X. THE PROBLEMS OF ECONOMIC INSECURITY 
63. Insecurity under Modem Industrialism 

A. A second problem which has to do primarily with the welfare 
of the classes which make up society is that of economic insecurity. 
Security in an economic sense there has never been, but the problem 
of modern security is infinitely complicated by the manifold aspects 
of the pecuniary organization of society in which it has its being. 

B. 3,12,25,97. 

C. I. Compare the manorial with the modern industrial system 
in respect to economic security. 2. To what extent is insecurity due 
to competition? to the perfection and extension of the machine 
system? 3. What are the principal manifestations of modern inse- 
curity. 4.' Is it likely that the problem can be solved through an 
extensive insurance program ? 

D. T. "Mediaeval insecurity had its source in local disasters, 
such as floods, droughts, and raids. The organization of society on 
a personal basis caused the resulting suffering to be shared by the 
whole group rather than to be confined to particular classes or indi- 
viduals." In harmony with this statement, contrast mediaeval and 
modern economic security. In what respects is the foregoing state- 
ment inaccurate ? 

2. "The machine system, production on a large scale, pecuniary 
competition, dependence on distant and future markets, the inter- 
locking scheme of prices, the violent rhythm of the economic cycle, 
and the onward rush of the industrial system into an unknown future 
prevent one from knowing what is in store on the economic morrow." 
Connect each of the characteristics of the industrial system mentioned 
with the problems of economic insecurity. 

3. "Because of the delicate pecuniary organization of society the 
consequences of a failure of the industrial machine at one point are 
dissipated through the whole of the economic order. Thus the 
burdens of economic insecurity are much smaller than they would 
be under a non-pecuniary organization." Develop this argument. 
Can you support it ? 

4. "Under our system economic insecurity is the lot of capital 
as well as of labor." Explain. 

5. "Industrial insurance is no solution of the problems of eco- 
nomic insecurity. It substitutes for an analysis of those problems an 

70 



THE PROBLEMS OF ECONOMIC INSECURITY 71 

accurate accounting of industrial risks; for an attempt at solution 
an endeavor to distribute the risks with the minimum of burden." 
Explain fully. Do you agree ? 



66. Unemployment 

A. The most conspicuous manifestation of economic insecurity 
is unemployment. The name is used to denote, not a single problem, 
but a number of problems unlike in all respects except that they deal 
with classes or types of labor "out of jobs." To deal intelligently 
with the problem an analysis of the various types must be made, the 
fundamental sources of each must be discovered, and means must be 
found for controUing these. In its entirety the problem involves 
many other economic problems and calls for an elaborate and long- 
time program. 

B. 3, 67, loi, 370. 

C. I. By amending Beveridge's list draw up a classification of 
the types of unemployment. 2. Determine the fundamental con- 
ditions underlying each type. 3. Unemployment of what types may 
be lessened by the establishment of labor exchanges ? by the " cyclical 
distribution" of government orders? 4. The evils incident to what 
types of unemployment can be minimized by insurance? 5. Show 
the obstacles in the way of the application of insurance to unemploy- 
ment. Are they real or apparent ? 

D. I. " Under the manorial system both serf and lord had rights 
in the serf's labor, and both lord and serf had rights in the lord's land. 
Under the modern system all rights in labor have been concentrated 
in the laborer and all private rights in property in its owner. This 
change in property rights and the consequent necessity of bringing 
labor and property together through contract have much to do with 
the nature of modern unemployment." Explain in detail. 

2. "Some unemployment is due to the friction incident to the 
imperfect organization of society upon a pecuniary basis." What 
labor markets are not highly organized ? What is the most obvious 
way of dealing with the type of unemployment suggested here ? 

3. "The determination of values under competitive conditions 
may be depended upon to protect the pecuniary interest of those 
engaged in seasonal occupations." Does it render full protection? 
Does it solve the larger problem of enabling society to make the 
best use of its available labor supply ? 

4. "The volume of business is constantly expanding and con- 
tracting. Labor is not flexible enough to make an immediate response 
to these changes in the volume of trade." Explain in detail. What 



72 CURRENT ECONOMIC PROBLEMS 

labor force, for this country at least, brings about a partial adjust- 
ment ? With what larger problem is the problem of cyclical unem- 
ployment merged? 

5. May the problems of unemployment be expected to become 
less acute if the pecuniary organization of society is perfected? if 
the rhythm of the trade cycle is lessened ? if our tariff policy becomes 
more stable ? if the railroad systems are brought under government 
ownership ? if regulated monopoly displaces competition quite exten- 
sively ? if the volume of immigration is reduced ? if the government 
prescribes conditions of employment and rates of wages ? if collective 
bargaining becomes universal ? if industrial development proceeds at 
a slower rate ? if society adopts socialism ? What is your conclusion ? 

67. Industrial Accident 

A. The problem presented in industrial accident reveals, not only 
an important manifestation of economic insecurity, but inability of 
a legal system established under a tool regime to deal properly with 
conditions associated with the machine technique. Its solution 
involves both a reduction of industrial accident to a minimum 
and a socially equitable distribution of the costs incident to industrial 
casualties. 

B. 30; 49, 330, 331- 

C. I. What can be done to reduce industrial accident incident 
to the machine process to a minimum? Who can do it? 2. Can 
individual responsibility for industrial accident be determined? 
3. State and criticize the "theory of negligence" as a means for 
placing the incidence of work accidents where it belongs. 4. What 
are the social costs of allowing the incidence of work accidents to 
rest with injured workmen or their fellow-employees? 5. Make out 
a case for or against the necessity of employer's liability. 

D. I. "Under the craft system, where tool-methods of produc- 
tion were used, and the employees were few in number, individual 
responsibility for accidents could be directly imputed, and the theory 
of negligence worked substantial justice." Defend this statement, 
making use of two or three hypothetical illustrations. 

2. "A wheel of a machine in a factory contains a defective piece 
of material. Because of this the wheel one day comes off, injuring 
the workman in charge. The machine has been properly inspected 
by state officials." Impute individual responsibility for the accident. 

3. By citing three or four illustrations of your own, show the 
impossibility of applying the doctrine of "assumption of risk" under 
modern conditions. 



THE PROBLEMS OF ECONOMIC INSECURITY 73 

4. If "employer's liability" is deemed advisable, should the law 
be made to apply to miners, factory operatives, machinists, locomo- 
tive engineers, drug clerks, errand boys, household servants ? 

5. "Under the competitive system the incidence of work acci- 
dents, even if legally assessed, does not fall upon the employer. He 
adds it to the price of his product and it is paid by the consumer." 
Explain in detail. Is "employer's liabiHty" merely an insurance 
scheme ? 

68. Sickness and Old Age 

A. Sickness, incapacity, and old age are incident to all human 
life; yet, in character, in quantity, and in economic meaning they 
have been profoundly affected by the machine process. Together 
they present three clearly defined problems: first, the reduction of 
"dependence" through " preventive medicine " and the "conservation 
of human resources"; secondly, economic adjustments to the end of 
making employment for the partially disabled; and thirdly, the 
equitable distribution of the incidence of dependence. 

B. 56, 57, 359, 36o._ 

C. I. Give some estimate of the economic cost of sickness; of 
old-age dependence. 2. Sketch a program which will result in greatly 
reducing this cost. 3. Should such cost as is left be borne wholly by 
the individuals affected? 4. Can the British national insurance 
scheme be used in this country ? 5. Is the pension plan the one best 
adapted to dealing with dependent old age ? 

D. I. " Because of its highly specialized nature and its capacity 
to utilize a myriad of different kinds of services, modern industrialism 
comes much nearer than any other system to providing remunerative 
employment for the partially disabled." Illustrate with examples 
from personal observation. What changes in the industrial system 
or in the acquired productive powers of individuals can make this 
provision more ample? 

2. What can " preventive medicine" do to decrease the amount 
of dependence ? immigration laws ? eugenics ? child-labor laws ? 
compulsory education? a broader basis for vocational education? 
Enumerate other agencies which can be used in the program to 
minimize the costs of dependence. 

3'. Provision for sickness and old-age benefits can be made by the 
state, by the employer, or by the laborer himself. Give the argument 
for and against each scheme. Draw up a scheme alike practicable 
and compatible with your social ideals. 

4. " Schemes, such as these, involving compensation for industrial 
accidents, sickness benefits, and old-age pensions, strike at the cardinal 
principle of our civilization. Self-control, self-reliance, self-provision, 



74 CURRENT ECONOMIC PROBLEMS 

and self-respect lie at the basis of all individual freedom. It is at 
these things that such socialistic schemes strike." Is the point well 
taken ? 

5. "Provision for the destitute through benefits and pensions 
makes bad matters worse by taking away the incentive to thrift." 
Do you agree ? 

69. The Standard of Living 

A. Because its upper limit is determined by pecuniary income, 
which is subject to all the caprice of the market, "the standard of 
living" is, and must remain, a manifestation of economic insecurity. 
It has for us the added interest that it is a factor of prime importance 
in the tariff, immigration, trade-union, and minimum-wage problems. 

B. 156,225,228,235,239,276,292. 

C. I . What is the economic importance of the standard of living ? 
2. Is the evidence of low living-standards indicative of faults in the 
economic system or of inefficiency on the part of the laborers ? 3. Is 
a "fair living wage" an economic or an ethical concept ? 

D. I. On the basis of the prices in your city, determine how a 
family, consisting of father, mother, and a child of eight, should 
apportion its income of $450 a year; $900 a year; $3,500 a year. 
After drawing up the three budgets compare the percentages in each 
spent for food, rent, clothing, etc. What conclusions do you draw ? 

2. "Immediately, wages determine the maximum standard of 
living for the laboring class; ultimately, the standard of living may 
determine wages." Explain the paradox. 

3. "In every family there is a struggle between the standard of 
living, savings, and unborn children." Explain. Show the economic 
importance of the alternative solutions of the problem presented in 
the struggle ? 

4. Should a "fair living wage" be sufficient to support one, two, 
four, six, or ten? Should it be able to yield this support if very 
economically used, if spent with some waste, or if lavishly used? 
Should it yield the bare necessities of life, certain comforts in addi- 
tion, or a few luxuries in addition to the comforts ? What are neces- 
sities? comforts? luxuries? Is a "fair living wage" a scientific 
concept ? 

70. The Minimum Wage 

A. Various proposals have been made to establish higher living 
standards by legally raising wages. These proposals are devious, 
one modestly limiting itself to the sweating industries, another more 
broadly to "all occupations open to women," a third quite hopefully 
to "all unskilled labor in general," and a fourth boldly proposing "a 



THE PROBLEMS OF ECONOMIC INSECURITY 75 

schedule of minimum rates for all occupations employing manual 
labor." They are alike, however, in proposing, directly or indirectly, 
the substitution of an "authoritative" for a "competitive" wage. 
This section can do nothing more than indicate the larger issues 
involved in these proposals. 

B. 74, 180, 195, 221. 

C. I. What economic and social conditions are responsible for 
minimum wage proposals? 2. Enumerate the proposals, analyze 
them, and state the issues involved in each. 3. What legal and con- 
stitutional difficulties impede minimum-wage legislation ? 4. Enumer- 
ate and pass judgment upon the validity of the economic arguments 
urged against these proposals. 5. Draw up a minimum- wage proposal, 
supplemented, if necessary, by other proposals necessary to make it 
practicable ? 

D . I . " The enactment of a minimum wage for unskilled working 
women would in all probability lead to one or more of the following 
results: numerous and varied evasions of the law; substitution of 
more efficient for less efficient labor; substitution of male for female 
labor; an increased use of machinery; a rise in the price of goods; 
and an increase in unemployment." What extension of government 
authority would be necessary to prevent failure through the devices 
enumerated ? 

2. "Quite likely the minimum wage would increase prices of 
commodities. Since in general unskilled labor consumes the goods 
which it produces, laborers would, in the end, pay in increased prices 
what they receive in increased earnings." What is the weakness in 
this argument? 

3. "In connection with the minimum wage the question of 'To 
whom ?' is easily disposed of. The question of ' From whom ?' is fully 
as important, being fraught with grave consequences to society." 
Mention several sources from which the increase in wages might come. 
State the probable consequences of taking it from each of these 
sources. 

4. "The increased wages will probably come from the parts of 
the incomes of capitalists which otherwise would be saved. Thus 
the proposal, by threatening to decrease capital, threatens still lower 
competitive wages in the next generation. This tendency is likely 
to prove cumulative." Do you agree ? 

5. "Under minimum wage laws, rates of wages will soon become 
established. Their very inflexibiUty will be a serious obstacle in the 
way of the organization of a society as dynamic as ours upon a pecu- 
niary basis." Explain this difficulty in detail. Just how real is it ? 

6. "The beneficial results of a minimum wage come only in the 
less immediate future. If it be made to fix an ideal, and if it be 



76 CURRENT ECONOMIC PROBLEMS 

properly supplemented by social conventions and laws designed to 
decrease the number of laborers, to establish higher living standards 
among them, and to increase their productive efficiency, it may 
eventually accomplish all of its objects." Is this long-time chance 
worth taking? Is it possible that without it the other proposals 
mentioned might accomplish its objects ? 

71. Compulsory Arbitration and Wages 

A. Compulsory arbitration is best treated as an aspect of the 
minimum wage; for it involves in all their complexities all the social 
and economic issues which find expression in the proposal to fix 
wages authoritatively. 

B. 279,370,371. 

C. I. What kind of a minimum wage proposal is compulsory- 
arbitration? 2. Is compulsory arbitration the cause of the increase 
in wages in New Zealand ? 3. State the case for and against compul- 
sory arbitration. 4. Could compulsory arbitration be made to work 
under American conditions ? 

D. I. Is it inconsistent to try to maintain wages through com- 
pulsory arbitration and to keep the door open to immigrants ? 

2. "The problem of low wages can be solved through a program 
consisting of compulsory arbitration and a minimum wage for immi- 
grants." Explain. Do you agree? 

3. "For an arbitration board to allow its employees an increase 
in wages because of the large profits made by an industrial concern 
amounts to discrimination against similar laborers employed in con- 
cerns that are not making large profits." Explain. Do you agree? 

4. "The determination of wages by particular establishments is 
out of harmony with the pecuniary organization of society. The 
factors which must be taken into consideration in making a decision 
affecting wages far transcend the evidence which any particular 
establishment can furnish." Make this argument as clear and as 
concrete as you can. 

5. Draw up a list of all the factors which must be taken into 
account in passing upon the rate of wages in a given establishment. 
State quite specifically the criteria by means of which the justice of 
the rate of wages can be determined. 



XI. THE PROBLEMS OF TRADE UNIONISM 
72. Group and Class Consciousness 

A. As the social system, incident to the machine culture, becomes 
more rigid, the workers see more clearly that they constitute a rela- 
tively permanent proletariat. There develops accordingly a feeling 
of an identity of interests within the class, or the group, and of a 
conflict of interests between classes or groups. This "class" or 
"group" consciousness finds its chief expression ia attempts, through 
"trade" of "industrial" unions, to increase the welfare of the class 
or group. The problems in which "class consciousness" is a factor 
embrace the whole life and interests of the worker. 

B. 25^ 54, 132, 254. 

C. I. Account for the slow development of class consciousness 
in America. 2. In what essential respects are the interests of the 
"bourgeoisie" and the "proletariat" in opposition ? 3. What advan- 
tages to the worker inhere in organization? what advantages to 
society in the organization of workers? 4. Give evidence showing 
that the consciousness which has developed in America is of the 
group rather than the class. 

D. I. Fundamentally, are the interests of laborers of the same 
group identical ? the interests of dififerent groups of laborers ? the 
interests of capitalists and laborers ? 

2. "Codes of medical and legal ethics are but the expression of 
the pecuniary interests of the groups in question." Discuss, citing 
examples. Why should a consciousness of the identity of interests 
of the members of the group have arisen so early in the professions ? 
Why should it have come earlier among groups of skilled than among 
groups of unskilled laborers ? 

3. " Under the present economic order the laborer and the capital- 
ist alike gets what he produces." Under the present system does 
each man produce an individual product ? Does he produce a definite 
part of a joint product ? How can you tell what he does produce ? 

4. " Because of the economic necessity resting upon the owner to 
protect and conserve the capital which he has invested in his slave, 
the system of chattel slavery made far better provision for the welfare 
of the laborer than does that of wage-slavery." Defend or attack 
this statement. 

5. "The desire of the laborer is to make as much as possible out 
of his life as a whole. Since under the wages system contracts are 

77 



78 CURRENT ECONOMIC PROBLEMS 

for short periods, the employer desires to get as much as possible out 
of the laborer during the legal term of employment." Does unregu- 
lated competition give the employer any alternative ? What has the 
open door to immigrants to do with the matter? Is the antithesis 
stated above a correct one? If so, in what problems does it find 
expression ? 

73. The Viewpoints of Laborer and Capitalist 1 

A. The activities of groups of laborers and capitalists alike 
spring from judgments. Now judgments are premised, not so much 
upon real interests, as upon conceptions of interests. Accordingly, to 
understand aright the programs of industrial groups we must know 
something of the ''viewpoints" of those responsible for them. 

B. 27,52,62,251,323,324,355. 

C. I. Is "The Sons of Martha" an accurate expression of the 
viewpoint of class-conscious labor? 2. Criticize Hoxie's theory of 
the origin of the viewpoints of the capitalist and the laborer. 3. What 
distinction do you notice between the two parts into which almost 
every article of the "economic creed" can be divided? 4. Tabulate 
in parallel columns the particulars in which the viewpoints of laborers 
and capitalists differ. 

D. I. "If the theory of the 'types of unionism' is true, there 
can be no viewpoint common to laborers." Do you agree ? 

2. "Social life is an extremely complex thing. One belongs, not 
to a single, but to many, different groups. In America, therefore, 
there can be no such thing as a group or a class viewpoint." Illus- 
trate for individuals in the middle class. Does the conclusion apply 
to the proletariat ? 

3. "Under industrialism our scheme of conventions and inhibi- 
tions, legal and social, has as its objective the preservation of the 
pecuniary interests of them that have." How can laws and social 
conventions reflect class interests ? Defend or attack the statement 
above. 

4. " Christianity preaches self-sacrifice, content, leaving vengeance 
to God, and patiently waiting for a reckoning in the next world. Thus 
it is one of the most powerful instruments in the preservation of the 
capitalistic system." Show that there can be nothing in this. 

5. "True partriotism demands absolute loyalty to our constitu- 
tion, our legal system, and our established and tested social arrange- 
ments." Why does it? What condemnation should be heaped on 
the laborer because of his stinted loyalty to American traditions and 
institutions ? 

6. Why do employers generally talk in terms of national and 
social welfare and laborers in terms of group and class welfare ? 



THE PROBLEMS OF TRADE UNIONISM 79 

74. Character and Purposes of Trade Unions 

A. Unions there are in infinite variety, serving an indefinite 
number of immediate purposes. Each, however, is intent upon serving 
the material interests of the group composing it, and, to a lesser extent, 
those of organized labor as a body. To accomplish this object 
each strives to build up a spirit of group solidarity and insists strenu- 
ously upon the necessity of group action. 

B. 12, 307. 

C. I. From what viewpoint does Eliot pronounce trade unions 
undemocratic? Are his strictures justified? 2. Does Carnegie leave 
a place for a very vital trade union ? 3. Why does Mitchell rest his 
case upon the necessity of collective activity? Do you agree with 
him? 4. What is your reaction to each of the three views here 
presented ? 

D. I. " Individual competition may be depended upon to secure 
justice to employer and employee alike. Therefore, in a democracy 
there is no place for a union, which is virtually a monopoly of labor." 
Develop this argument in detail. What assumptions underlie it? 
Do you accept its conclusion as a valid statement of social 
policy ? 

2. "Unionism represents a vast monopoly of skilled labor which 
waxes fat at the expense of unskilled labor and the general public." 
Do you agree ? 

3. "One of the greatest obstacles to unionism is the chance which 
the employer has to disassociate the pecuniary interests of union leaders 
from those of the group which they represent. Judicious promotions 
and discharges, as well as more sinister methods, may be used to 
make labor leaders favor the interests of employers." Develop this 
argument in detail, citing concrete evidence from your own observa- 
tions. How can unionism guard against this danger ? 

4. " Under a system of free contract it is hard to establish a spirit 
of group solidarity so long as the open door to immigrants gives a 
transitional tendency to all industry." Explain. 

5. "The 'hiring and firing system' aims at productive efiiciency 
at the expense of a conservation of human resources and a realization 
of the fulness of life by the laborer. Unionism aims at a modification 
of the rigidity of the system to give a larger life to the laborer." Is 
this a correct statement of the aims of unionism ? 

6. "Unionism aims to win from the productive demands on the 
laborer" enough of time and income to give him a varied consumption 
to balance the monotony of his productive life." Criticize this as a 
statement of the aim of unionism. Present a substitute statement 
which you regard as more accurate. 



8o CURRENT ECONOMIC PROBLEMS 

75. The Theory of Unionism 

A. For the realization of its ends unionism attempts to establish 
such conditions as will effectually preserve the solidarity of the group 
or class and cause it to act as a unit. The epitome of union theory is 
the "principle of uniformity," in terms of which all union conventions 
and practices find their expression. 

B. 48, 292, 324. 

C. I. Explain the meaning, the purpose, and the importance of 
the principle of uniformity. 2. Explain collective bargaining, the 
closed shop, control of technique, and control of apprentices in 
terms of this principle. 3. Show, by concrete examples, the value 
of collective bargaining to unionism. 4. State the economic argu- 
ments for and against the closed shop. 5. Is the closed shop ethically 
defensible ? 

D. I. "The spirit of collective activity underlying unionism is 
antithetical alike to our individualistic political and legal system and 
our pecuniary organization of society." Show that this antithesis is 
real. What fundamental problems does it involve? What other 
tendencies or proposals considered in this course have the same anti- 
individualistic character ? 

2. "The closed shop, finding expression in a complex and detailed 
ritual as to technique, workmen, and materials, strikes at the very 
root of productive efficiency." Cite examples showing wastes incident 
to these minute rules. Defend or attack the statement above. If 
the statement is true, is there any defense left for the closed shop ? 

3. "The levying of customs duties, the exclusion of aliens, the 
drawing of the color line, and the admission of the select few to a 
sacred social circle are all expressions of the closed shop." Do you 
agree ? Are these practices defensible ? Point out examples of the 
"closed shop" practiced by capitalists. On what gound can the 
closed shop be defended ? 

4. "In two respects unionism strikes at the very basis of our 
civilization: first, by insistence upon 'uniformity' in wages, it denies 
to the talented and ambitious man a chance to rise, thus discriminating 
in favor of mediocrity; and second, by the closed shop, it denies to the 
non-union man his God-given right to make a living for himself and 
his family by working at his trade." Appraise this attack upon 
unionism. 

5. "The ideal institution, calculated to preserve the rights of 
unionist, non-unionist, employer, and public, is the closed shop with 
the open union." Is such a thing a contradiction in terms ? 

6. "By control of hiring and discharge, the technique of work- 
manship, and the condition of employment, the union can win for 



THE PROBLEMS OF TRADE UNIONISM 8l 

its members economic security. By collective bargaining it can 
virtually establish the prescribed conditions permanently. Thus, 
within the law, labor can win back the equities in property which it 
possessed under the manorial system." Under what conditions can 
this program be fulfilled ? Is it likely to be fulfilled ? Would a reali- 
zation of it be advantageous to union laborers ? to the employers ? 
to the public ? 

76. The Weapons of Industrial Conflict 

A. The realization of their divergent ends involves labor unions 
and employers in a perpetual "industrial conflict." Strikes and 
fockouts are but the most obvious manifestations of this struggle. 
The unions use many other weapons adapted to their purposes, and 
plan short-time and long-time campaigns with consummate strategy. 

B- 329. 333, 334, 336- 

C. I. What means are used by unions to secure a spirit of group 
solidarity? Are they effective? 2. What "weapons" are used to 
force their demands upon employers? How effective is each? 
3. What weapons have been perfected by employers for resisting 
the demands of the laborers? 4. What prime object lies back of 
the organization of "employers' associations"? 5. Account for the 
weakening in the strategic position of organized labor in the last 
ten years. ■* 

D. I. "The employer is an opponent worth fighting; the 'scab' 
is an anti-social traitor who has no rights to be respected." Why 
do unions find it accessary to encourage such feelings against scabs ? 

2. "Every weapcm used by the unions finds its complement in a 
similar weapon used by the employers." What is the complement of 
the strike ? the boycott ? Show instances in which the parallelism 
does not hold. 

3. "The boycott, for its success, depends upon publicity; the 
blacklist, upon secrecy. Therefore the conspiracy laws are much more 
easily enforced against the former than against the latter," Explain 
in detail. 

4. Present the arguments for and against the legalization of the 
boycott. On which side does the balance lie ? 

5. "The sympathetic strike is a necessary agency in the realization 
of the union program." What objections are usually advanced against 
the sympathetic stike ? What theory underlies the argument in its 
favor ? 

6. "The presence of large increments of immigrant labor has 
robbed some of the most powerful union weapons of their ^flUciency." 
Explain in detail. 



82 CURRENT ECONOMIC PROBLEMS 

7. "Through co-operation, careful study of the problem, and 
vigorous action employers' associations have reduced strike-breaking 
to an exact science." Explain fully. What influence has this had 
upon the strength of unionism? upon the future program and 
activities of unionism ? 

77. Scientific Management and Unionism 

A. Scientific management is one of the most spectacular of 
recent industrial developments. But, for our purpose, it is far more 
important that it is a point of conflict at which converge the antithet- 
ical theories underlying union activities and the programs which the 
employers are trying to put through. 

B. 29, 359, 360. 

C. I. Account for the great attention recently given to scientific 
management. 2. What improvements does scientific management 
propose in organization, management, choice of man, planning? 
3. What incentives does it offer the laborer to apply himself more per- 
sistently and intelligently to his work? 4. Are the objections to it 
urged by the unions group, class, or social objections? 5. What 
advantages may be expected from it to the employer ? the laborer ? 
the public ? 6. Does it offer a solution to the labor problem ? 

D. I. "The primary social problem is that of production. 
Solve that and the problem of distribution will take care of itself." 
Develop the argument. Do you accept it ? 

2. "Scientific management, by increasing productive efficiency, 
wiU decrease costs of production. Since, under competition, a new 
scheme of prices wiU be established, based on new costs, the general 
public will be the only permanent gainer from the change." Connect 
this with the principle that society is best served by each serving his 
own pecuniary interest. Is it valid ? 

3. "Scientific management is a mere device for securing the 
maximum from laborers. It selects them carefully, gives each just 
the proper quantum of training, strips them of their labor power 
through artificial wage incentives, scraps them like old machinery, 
and starts afresh with a new group of carefully selected laborers." 
How much is there in this argument? What have competition and 
short-term labor contracts to do with it ? 

4. "By its usurpation of the control of technique, scientific man- 
agement threatens to rob laborers, individually or collectively, of the 
property rights which at present they possess in their trades." State 
this argument more fully. What validity has it ? 

5. "Scientific management and unionism are in irreconcilable 
conflict. The former gives control of the business to the employer, 
tends toward specialized tasks and hence individual "bargaining, and 



THE PROBLEIMS OF TRADE UNIONISM 83 

threatens a premature using up of the laborer's productive contribu- 
tion. The latter insists upon union control of technique, collective 
bargaining, and the conservation of the resources of labor." Examine 
this alleged antithesis in detail, and pass judgment upon it. 

6. "Even if it realizes all that is claimed for it, scientific manage- 
ment can furnish no permanent solution of the labor problem. If it 
gives more, the pressure is relieved immediately, but with increasing 
population it will return." If real wages were generally doubled, 
would that solve the labor problem? If the program of unionism 
was realized in every respect, would that solve the labor problem ? 
How long will this problem be with us ? 

78. Unionism and the Anti-Trust Laws 

A. As the use of their economic weapons has been more and more 
restricted, unionists have begun to look with more and more favor 
upon political action. The recent attempt to have labor unions 
exempted from the provisions of the "anti- trust" laws marks the 
first step in what is likely to prove a lengthy and interesting chapter 
in political history. 

B. 55, 329, 334- 

C. I. Is labor a commodity? 2. Explain and account for the 
difference in views between Gompers and Taft on the exemption of 
labor unions from the "anti-trust" laws. 3. Of what value to unions 
is the legal exemption of labor combinations in the Clayton bill ? 

D. I. "Labor is a commodity which, unUke other commodities, 
attaches in a peculiar way to the person of man. Hence conditions 
need to be placed upon its sale which would be unnecessary in other 
cases" (Green). If so, should closed unions be allowed to impose 
these conditions upon employers, or should they be determined by the 
state ? 

2. Is a provision estopping prosecution of an individual "for 
entering into any combination or agreement having in view the 
increasing of wages, shortening of hours, or bettering the condition 
of labor" class legislation ? What is class legislation ? Is legislation 
properly to be condemned because it is class legislation ? 

3. State quite fully why the counsels favorable to " direct action" 
prevailed in union circles two decades ago ? Why is the party favor- 
able to "political action" gaining ground? 

79. Revolutionary Unionism 

A. With the development of our highly industrial, pecuniary, 
and urban culture there springs up a spirit of revolutionary protest. 
To some extent this manifests itself in independent organizations, 



84 CURRENT ECONOMIC PROBLEMS 

but to a much greater extent among the rank and ille of unionists 
themselves. Its study reveals class consciousness in its most extreme 
form. 

B. 286,355. 

C. I. Account for the presence in this country of revolutionary 
unionism. 2. Contrast the purposes, programs, and weapons of the 
industrial and the trade unions ? 3. Sketch and criticize the proposed 
syndicalistic organization of society. 4. Cite examples of different 
kinds of sabotage which have come under your own observation. 
5. Is sabotage confined to the industrial unions ? to labor unions ? 
to the laboring class? 6. Could a general strike succeed? 7. Of 
what value is revolutionary unionism in a general study of the labor 
problem ? 

D. I. "The very success of the employers in checking unionism 
is the chief cause of the rise of revolutionary unionism. Sabotage 
can be apprehended by no policemen and dragged into no court." 
Is the first statement true ? Are laborers likely to find sabotage a 
useful weapon? 

2. What is an "intermittent strike" ? Is it to be classified as a 
strike or as sabotage ? Is it an effective weapon for direct action ? 

3. "The use of sabotage is attended with grave social dangers. 
It makes the laborer himself the judge of whether he is given his 
rights; it encourages a spirit of disregard of productive efficiency; 
and it threatens the whole pecuniary organization of society." Show 
by concrete examples how real and threatening these dangers are. 

4. "The general strike can never succeed, for the class which 
would suffer first from it would be the industrial workers," Do 
you agree ? 

5. "Their ability to wait gives to the employers in the industrial 
struggle an advantage which laborers will never be able to possess." 
Are short strikes usually won by laborers or by employers? long 
strikes ? Enumerate quite definitely the strategic advantages which 
ability to wait gives the employers. 

6. Imagine yourself a leader in the trade-union movement and 
draw up a comprehensive and adequate program for future action. 



XII. SOCIAL REFORM AND LEGAL INSTITUTIONS 
80. The Legal System 

A. Our institutions, such as law, property, and competition, are 
interesting alike from the standpoint of order and of welfare. From 
the former viewpoint they are elements in the social order; from the 
latter they are conventions capable of modification in the interests of 
general or group welfare. To questions of the social advisability of 
modifying these institutions, and the nature of such modification, the 
questions which we have already discussed, particularly economic 
insecurity and trade unionism, have led us. The first of these to be 
considered is the legal system. 

B. 48, 60, 309. 

C. I . Why has the resolution of social problems into institutional 
questions come so late in America ? 2.1s the theory of the economic 
basis of law adequate? 3. Show, by concrete illustrations, that law 
is not immutable? 4. Are there today serious incompatibilities 
between law and the economic and social system? 5. Should the 
law be a conservative or a radical factor in social development ? 
6. Does an affirmative answer to the preceding question commit one 
to opposing the introduction of a new concept of "social justice" 
into the law ? 

D. I. Write a short essay upon "The Function of Law in the 
Maintenance of the Economic Order." 

2. "The intricate and delicately balanced industrial system, with 
its requirement of many immediate judgments affecting the future 
welfare of all classes, demands, even more than it demands absolute 
justice, certainty in the law." Show that a definite legal system is 
necessary to eflBiciency under the present industrial order. 

3. "It is only as law prescribes definite fundamental conditions 
that progress in other aspects of social life becomes possible." Develop 
this argument in detail. Is it valid ? 

4. "The legal use of precedents is incompatible with modern 
thought. We know that as time goes on qualitative changes come 
over all things human. Our institutions are constantly becoming 
new institutions. Yet the method of precedents ignores these changes, 
and proceeds as if things called by the same names in the sixteenth 
and the twentieth centuries were the same." Develop this argument, 
citing the most convincing evidence that you possess. Do you regard 
it as conclusively disposing of precedents ? 



86 CURRENT ECONOMIC PROBLEMS 

5. "The individualistic basis of law is incompatible with an 
intricate co-operative industrial system, wherein individual responsi- 
bility cannot be definitely located." Illustrate, by reference to the 
corporation problem, the problem of the state and the railway, and 
the problem of industrial accident. 

6. "The principle of 'equal rights to all, special privileges to none' 
can be applied in a homogeneous society, composed of individuals 
who, economically and socially, are approximately equal; but it is 
meaningless in a society made up of heterogeneous groups, who per- 
form unlike functions and who occupy unlike positions, economically 
and socially." Explain. What has this to do with "class legislation " ? 

7. Formulate a conception of "social justice" relevant to the 
present situation and adequate to the purpose, which can be made 
the basis of our legal system. What is involved in the thorough 
incorporation of such a concept into the law ? 

81. Private Property 

A. A second institution, private property, has a Hke interest 
from the standpoints of order and welfare. Private equities in prop- 
erty, either direct or indirect, are inseparable from social order. But 
the distribution, forms, and conditions of ownership of these equities 
are subject to the greatest variety. 

B. 16, 254, 289, 354, 372. 

C. I. Compare the mediaeval and the modern institutions of 
private property. 2. On what various ethical bases is private prop- 
erty justified? 3. On what ethical grounds is an attack made upon 
private property? 4. What is the proper ethical criteria by which 
to judge property? 5. In accordance with these, what forms of 
modern property are, and what are not, justified ? 

D. I. Distinguish between and pass upon the validity of each of 
the following definitions of property: (a) "ownership of material 
things " ; (5) " a right to a pecuniary income " ; (c) " a right to a share 
of the social dividend produced by labor"; and (d) "a complex of 
ideas and regulations as to how accumulated power in the struggle 
for self -maintenance is to be distributed." Formulate a satisfactory 
definition of property. 

2. Show how equities in property may be modified by the state; 
by changes in social conventions; by changes in technique. 

3. "The transition from the personal organization of society in 
the Middle Ages to the pecuniary organization of modern industrialism 
was accompanied by a redistribution between owner and worker of 
the equities in labor and in productive instruments." Explain. 
What light does this throw upon the nature of property ? 



SOCIAL REFORM AND LEGAL INSTITUTIONS 87 

4. "Private equities in property are with us forevermore. Under 
forms of collective ownership the nexus between the individual and 
the material thing is broken; but there still remain to individuals 
equities in the organization which owns the material things." Illus- 
trate for monasticism; for a socialistic state. 

5. Show, by illustrations, how the institution of private property 
prevents acts economically destructive; makes it to the interests of 
various persons to perform productive operations; obliges persons 
to co-operate; establishes an institutional system that encourages 
co-operation; and enables world-wide co-operation to take place. 

6. "Private property, freedom of contract, and competition are 
complementary institutions, together adapted to the functions which 
they perform in the organization of modern society upon a pecuniary 
basis." Taking this as your text, write a short essay upon "The 
Fundamental Institutions of Organization in Modern Society." 

7. "The real problems associated with private property are con- 
cerned with a distribution of the public and the private equities in 
property." Explain, with concrete illustrations. 

8. "The early church doctrine of Christian communism plus the 
mediaeval recognition of the rights of private property equals the 
modern doctrine of Christian charity." Explain fully. Do you agree? 

9. "The two complementary aspects of property are rights and 
responsibilities. For property properly to play its part in the social 
order the two must be associated." Were the two closely associated 
in the Middle Ages? With the rise of modern industrialism which 
has the more nearly dominated the concept? What are the real 
problems relative to property which the modern order has as yet 
failed to solve ? 

10. "The real problem of property is to secure a more equitable 
• distribution of its benefits without interfering with the essential 

functions which it performs in organizing society and stimulating 
production." Do you accept this statement of the problem ? How 
is it to be solved ? 

82. Industrial Liberty 

A. A third institution, industrial liberty, is of a kind with and 
complementary to those just studied. Like them, it is alike a factor 
in social order and in social welfare. 

B. 45, 49, 55, 74, I35>3i8. 

C. I. What is the relation of freedom of contract to the modern 
institution of property? 2. Explain the theory of the "mediatory 
character of freedom." Is it held by the courts ? 3. In the light of 
"what freedom of contract has meant to labor" appraise the argu- 
ment that it develops personal responsibility, 4. Is freedom of 



88 CURRENT ECONOMIC PROBLEMS 

contract premised upon an outworm philosophy? 5. Do those who 
criticize the legal principle advocate its abandonment or its 
modification ? 

D. I. " The spirit of individualism attending the opening of the 
New World and the Industrial Revolution found expression in un- 
restricted freedom of contract. As the industrial system loses its 
transitional quality freedom of contract will be more and more 
restricted." Do you agree ? 

2. "The right of a person to sell his labor upon such terms as he 
deems proper is, in its essence, the same as the right of the purchaser 
of labor to prescribe the conditions upon which he will accept such 
labor from the person offering to sell it. So the right of the employee 
to quit the service of the employer, for whatever reason, is the same 
as the right of the employer, for whatever reason, to dispense with the 
services of the employee. In all such particulars the employer and 
the employee have equality of right, and any legislation that disturbs 
that right is an arbitrary interference with the liberty of contract, 
which no government can legally justify in a free land" (United 
States Supreme Court). Is the equality of rights presumed in this 
quotation real or fictitious ? Attack or defend this doctrine. 

3. "Because of its false assumption of equality of rights between 
employer and employee, the principle of freedom of contract amounts 
to class favoritism." Do you agree ? 

4. "A regulation of the plane of competition necessarily involves a 
restriction of freedom of contract." Why ? 

5. "A tenacious insistence upon absolute freedom of contract 
would inhibit any rational attempt at social reform through legisla- 
tion." Using concrete illustrations, defend or attack this statement. 

6. "Public policy is a very unruly horse, and when once you get 
astride it you can never tell where it will carry you." Does this 
statement suggest the legal means by which freedom of contract is 
likely to be modified in the future ? 

83. The Courts and Labor 

A. Attempts to advance the pecuniary interests of the laborer, 
whether made by unions or by the state, are likely to involve, directly 
or indirectly, questions of property rights and of freedom of contract. 
Accordingly sooner or later they call for judicial decision. Since for 
the last few years judicial decision has pursued the comparatively 
even tenor of its way, many weapons used to aid organized labor have 
been wrested from its grasp or rendered ineffective. 

B. 60, 64, 289, 299, 309, 329. 

C. I. Why do judicial decisions loom so large as a factor in the 
labor problem? 2. Compare and criticize the theories \mderlying 



SOCIAL REFORM AND LEGAL INSTITUTIONS 89 

the decisions of the courts on the limitation of the working-day 
for women. 3. Are employer's and employee's rights reciprocal? 
4. State in general terms the issues involved in the Danbury Hatters' 
cases, and defend or attack the final court decisions. 5. Should 
injunctions be allowed in labor disputes ? 6. Appraise the reality of 
the assumptions and the validity of the argument in the decision on 
"Unionism and the Conditions of Employment." 

D. I. "A regulation of conditions of employment for men is 
class legislation." Legally, what is a class ? Is a class a reahty or a 
legal fiction ? In a differentiated society such as ours what is a class ? 
In such a society is it practicable to prohibit "class legislation" ? 

2. "Freedom of contract can be abridged only by the exercise of 
the police power of the state." For what purposes may the police 
power be invoked ? Just how is it to be determined whether a par- 
ticular attempt comes within one of these general purposes? In 
general, should questions of the last kind be determined by the legis- 
lature or by the courts ? 

3. "The inherent powers of our courts of equity shall not be 
abridged in the issuance of injunctions in labor disputes; and the 
power vested in our courts to punish for contempt of court shall not 
be abridged by the granting of jury trial for contempt." Connect 
these two questions with the struggle between employers and unions. 

4. "The law does not, and should not, embody a particular 
economic theory." Criticize this statement in the light of judicial 
decisions with which you are familiar. 

5. "The law of property and contract, as interpreted by the 
courts, gives economic advantages of superlative importance to 
capital in its conflict with labor." Do you agree ? 

6. "Violence and lawlessness are, of course, to be condemned; 
but what of a legal system that gives to laborers no other means for 
an expression of their just demands?" Is this criticism of the legal 
system warranted ? What means have laborers for an expression of 
their demands? 

7. "Through a natural strategic advantage and close organization 
possessed by the employers many of the weapons of unionism have 
been rendered ineffective. Through an extension of judicial inter- 
pretation of the rights of property and of contract other weapons 
have been rendered useless. The unions, therefore, are confronted 
with the alternative of vigorous political action or the use of sabotage 
and kindred devices." Translate the first sentence into concrete 
terms. Is the second sentence a truthful statement of the present 
situation ? If you were a leader in the union movement, what would 
be your advice as to the future? Compare your answer to this 
question with that which you gave to problem 6 in section 79. 



XIII. SOCIAL REFORM AND TAXATION 
84. Taxation and Industrial Development 

A. A discussion of the control of industrial development is 
incomplete if it does not touch the problems of taxation; for, first, 
there is the problem of adjusting the scheme of taxation to the new 
forms in which industrial activities run; secondly, if the functions 
of the state are to be increased, there is the necessity of additional 
revenue; and thirdly, there is the ever-present possibility of using 
the fiscal system itself as a means of social control. 

B. 25, 56, 58, 267. 

C. I. What particular problems have recently given current 
interest to questions of taxation? 2. What changes in social organi- 
zation are we effecting ? What influence are they likely to exert upon 
social expenditures ? 3. Show, by illustrations, how taxation can be 
used as a means of social control. Should it be so used ? 

D. I. "To extend our educational system; to furnish to the 
people opportunities for recreation, amusement, and cultural develop- 
ment; to lighten the burden of economic insecurity; and to perfect 
an adequate mechanism of social control, we must have additional 
revenue." By surveying the problems which we have discussed, show 
quite concretely this need for a growing revenue. Can the established 
tax system yield it in sufl6cient volume ? 

2. "A system of taxation must not interfere with the relative 
advantages possessed by competing business units and industrial 
groups." Of what larger theory is this a mere aspect? Account 
for its popularity. 

3. "In America the system of taxation, by encouragement and 
penalty, has served as a means for determining the direction of indus- 
trial development." Mention taxes whose object has been to dis- 
courage consumption; to encourage production. What particular 
tax has been quite influential in making our culture a highly industrial 
one? Can taxes be levied in such a way as not to exercise control 
over industrial development ? 

4. An appraisal of the taxable property of Michigan shows that, 
while all property is supposed to be taxed at a uniform rate, various 
classes of property are in reality taxed at the following rates : agri- 
cultural property, $10 per $1,000; railroads, $20.65; banks, $17; 
public utilities, $7; mines, $7; city residences, $4.70; and manu- 
factures, $5.30. What is meant by "the territorial competition for 

90 



SOCIAL REFORM AND TAXATION - 91 

industries"? Do the figures above throw any light upon this com- 
petition? Do they aid in answering the last question in 3, above? 

85. The Theory of Taxation 

A. To use such an instrument as taxation aright we must deter- 
mine what particular classes or properties are to be assessed, why the 
burdens are to be placed upon them, how the taxes thus placed may 
be expected to behave, and what results they will probably lead to. 
This involves an adequate knowledge of the technique of taxation 
and a thorough knowledge of our social program as a whole and what 
we expect to accomplish by it. 

B- 43, 49, 55, 56. 

C. I . Are Adam Smith's canons of taxation valid today ? 2. Ap- 
praise the merits of the ''benefits theory"; the "faculty theory"; 
and the "theory of proportional sacrifice." 3. Define and illustrate 
"progressive taxation." 4. Upon what classes and properties, and 
in what proportions, should taxes be levied ? 

D. I. Has the state the moral right to tax the bachelor for the 
support of schools ? to pay for harbor improvements through internal- 
revenue duties? to pay for the professional education of lawyers 
and physicians by land taxes ? to pay old-age pensions by levying 
income taxes ? 

2. " Each should pay in proportion to the benefits he has received 
from the state." Can the benefits yielded by the state to various 
individuals be stated in terms pecuniarily exact ? 

3. "Taxes should be levied in such a way as not to interfere with 
the provision which society is making for its future. They should, 
therefore, fall upon the parts of incomes which otherwise would be 
devoted to consumptive purposes. To be safe, it is always best to 
levy taxes upon the poor, who are reasonably sure to save nothing 
from their incomes." Defend this theory. Has it been tried in 
the past ? 

4. " Earned incomes should be taxed at a lower rate than unearned 
incomes." Draw a line between earned and unearned incomes. Is 
such a procedure justifiable ? 

5. Should taxation be used to secure "a more equitable distribu- 
tion" of wealth ? How can it be so used ? 

86. The Incidence of Taxation 

A. Whether we use taxation as an instrument of revenue or of 
social control, to effect our object we must understand its technique. 
For taxes do not always stay where they are put; their "incidence" 



92 CURRENT ECONOMIC PROBLEMS 

may appear in strange places, and they may produce unlooked-for 
and undesirable consequences. 

B. 163, 168, 178. 

C. I. Explain the terms "shifting" and "incidence." 2. What 
is meant by "forward" and "backward" shifting ? Give an example 
of backward shifting. 3. What would be the probable consequences 
of the incidence of a tax falling upon each of the factors of production ? 
4. Under what conditions does the incidence of the customs tax fall 
upon the foreign producer ? upon the domestic consumer ? 

D. I. " The incidence of a tax on a non-producible good usually 
falls upon the owner." Prove. 

2. " The incidence of a tax on a producible good usually falls upon 
the consumer, though it may, on occasion, be thrown back upon the 
producer of a raw material." Enumerate the conditions under which 
it is thrown forward ; backward. 

3. A residence in Bloomington is taxed each year $70; of this, 
$40 is chargeable to the house and $30 to the lot. The tax on the 
house will be paid by whom ? the tax on the lot ? 

4. "In the election on the bond issue next Tuesday, only property- 
owners should be allowed to vote, for they alone pay taxes." Show 
that those who live in rented houses pay taxes. 

5. "The imposition of a new tax on land is equivalent to a con- 
fiscation of the capitalized value of the tax; the revocation of a long- 
standing tax is tantamount to a free gift of the capitalized value of the 
tax." Prove. 

6. "A large share of the burdens of taxation in the southern states 
falls directly upon the negro. It is true that the taxes are paid imme- 
diately by the whites, but because of them the negro has to pay their 
equivalent in extra rent." Disprove. 

7. "If a monopoly fixes its prices in such a way as to secure the 
greatest maximum return, at least a part of the tax placed upon the 
goods sold by the monopoly will fall ultimately upon it." Explain. 
What determines how large a part will fall upon the monopoly ? 

8. "High taxes should not be imposed upon public-service indus- 
tries whose rates are subject to regulation. Such taxes make necessary 
an increase in the rates which the public has to pay for their services." 
If the rates of such industries are subject to regulation, would it be 
socially desirable to exempt then from taxation altogether ? 

87. "Unscientific" Taxation 

A. In the wake of the Industrial Revolution there has come a 
complete transformation of life and values. It is not surprising that a 
taxation system, established to meet the needs of a simpler economic 



SOCIAL REFORM AND TAXATION 93 

regime, should fail to conform to present social requirements. This 
failure is most manifest in the "general property tax." It is most 
significant in its failure to be grounded upon a modern concept of 
property. 

B. 320, 338. 

C. I. What concept of property should lie at the basis of a 
system of taxation? 2. Illustrate, from your own observation, the 
defects of the general property tax. 3. What is the fundamental 
objection to multiple taxation ? 

D. I. Discuss the definitions of property given in problem i in 
section 81 above, with the end in view of formulating a^ concept 
adequate for a theory of taxation. 

2. "A recent newspaper item says, 'This is the year real estate 
is assessed. Turn the cow loose in the front yard, tear down the 
fence, make things look generally delapidated, for it will be money 
in your pocket' " (Fetter). What is the significance of this statement ? 
Will it be to your advantage if you alone carry out this policy ? if 
all your neighbors carry it out ? 

3. "A systematic scheme of taxation is impossible so long as the 
political units imposing taxes are not coterminous with the industrial 
units which are assessed." Explain. Why has this particular sig- 
nificance for the general property tax ? 

4. Devise a practicable substitute for the general property tax. 

88. Tendencies in Taxation 

A. We are intent upon making our tax system conform to 
modern forms of wealth. We are intent upon distributing our tax 
burdens more " equitably." Together these intentions find expression 
in the increased emphsfsis which we are putting upon "corporation," 
"income," and "inheritance" taxes. 

C. I. Why is the general property tax inadequate in the case 
of corporations ? 2. Enumerate the features of, and pass a judgment 
upon, the Massachusetts corporation tax. 3. Why should we have 
a federal income tax? 4. Will a capitahzation of the inheritance 
tax free it from the economic objections which are usually urged 
against it? 

D. I. "In modem industrialism all property has a pecuniary 
aspect. In fact, property is valuable only as it yields, or is expected 
to yield, a money income. Its value varies directly with the size of 
the income. Accordingly, all taxes should be abolished except a single 
uniform tax on incomes." Does the conclusion necessarily follow? 
Support or attack the conclusion. 

2. Should income taxes be imposed by the nation, by the state, or 
by both ? What of corporation taxes ? inheritance taxes ? 



94 CURRENT ECONOMIC PROBLEMS 

3. "An income tax should be levied in such a way that it will be 
paid by the assessed out of the part of his income which he spends 
and not out of the part which he saves." Why ? Devise an income- 
tax law that will secure this result ? 

4. ''The greater the aggregate income, the greater the proportion 
which will be saved. If society pretends to make provision for its 
future, it will, therefore, devise a tax system which will place the 
greater part of the tax burdens upon the poor." Elaborate this 
argument. Does the present scheme of taxation meet this ideal ? 
If not, what changes would you make in it ? Do you accept the gen- 
eral theory that the paying of taxes is an attribute of the poor ? 

5. "The principle of graduation, as applied to the income and 
inheritance taxes, places the burden of taxation where it should rest, 
upon the shoulders of those who can pay." " Graduated income and 
inheritance taxes discourage the display of ability and enterprise; 
they place a premium on sloth and a discount on thrift." Where lies 
the truth ? 

6. "The future is likely to witness a greatly increased use of 
inheritance and income taxes." Why or why not ? 

89. The Single Tax 

A. The taxes just discussed indicate a growing disposition to 
use taxation as an agency of "social reform." This tendency is 
shown in its most extreme form in the proposal of a "single tax" on 
land values. Originally it contemplated taking away the full rental 
in taxation. At present its advocates are content to urge a modest 
percentage of the full rental. 

B. 322-25. ^ 

C. I. Why should an increase in land values be of greater public 
concern than an increase in personal or capital values ? 2 . Enumerate 
the arguments for and against economic rent as a private income. 
3. State and criticize the theoretical basis of the single tax. 4. Why 
are single-tax reformers making much more modest proposals than 
they did a generation ago ? 5. What directly or indirectly has society 
to gain from such a scheme as the single tax ? 

D. I. What would be the influence of a tax of 100 per cent of 
the rent of land upon the value of land ? the prices of the commodities 
produced on the land ? the price which the cultivator would have to 
pay for the use of the land ? the digtribution of economic opportunity ? 

2. "Because of differences in fertility or situation between dif- 
ferent pieces of land, rent is necessary to secure equality of oppor- 
tunity to the various cultivators. Because of this economic function 
rent is as inevitable under socialism as under the present system." 



SOCIAL REFORM AND TAXATION 95 

Develop this argument fully. Is it an argument for rent as a private 
income ? 

3. If the state, through taxation, takes away the "unearned 
increment" in land values, should it be required to subsidize decre- 
ments in such values ? 

4. "There are 'unearned increments' in incomes from personal 
service and from invested capital, as well as from land." Mention 
examples, if you can. Are such increments economically to be 
classed with those arising from land? What is the test cff "earned" 
and "unearned" values? 

5. "Since all property, landed and personal, can be freely bought 
and sold, there is no assurance that a tax upon the increase in land 
values would be paid by the person who profited by such an increase." 
Is this argument valid so far as past increases are concerned ? future 
increases ? 

6. "The single tax tries to justify or condemn incomes because 
of their origin. Sound social policy requires, on the contrary, a con- 
demnation or justification on the basis of the end which incomes 
serve." Develop this argument in detail and examine it. 

7. "Once single- taxers urged their scheme as a panacea for all 
social ills. Now they are arguing that it is the only tax which can 
furnish revenue sufficienWor financing the measures necessary to a 
reduction of social ills." Explain the change of viewpoint. 

8. "The question of the single tax is at bottom a question of the 
ethics of the institution of the private ownership of land." Explain. 
What light does this statement throw on the nature of the problem 
involved ? 



XIV. COMPREHENSIVE SCHEMES OF SOCIAL REFORM 
90. The Voice of Social Protest 

A. A "program of social reform" is implicit in the preceding 
study. However, to complete our treatment, it seems necessary to 
make at least a brief reference to some of the more radical schemes. 
A suitable introduction to them is the ever-old and ever-new "cry 
for justice," from which no age and no social system has been exempt. 

B. 14, 17, 27, 42, 46, 52, 71, 76, 79, 143, 200, 287, 312, 321, 322, 

329, 350- 

C. I. Make a list in tabular form of the conditions, institutions, 
etc., against which the protests given in the reading are directed. 
2. Contrast and compare earlier with later protests. 3. Of what 
value is a study of " the voice of social protest" ? 

D. I, In the development of society what function is performed 
by protest ? Which makes the greater contribution to the develop- 
ment of culture, the conservative or the protestant ? the "stand- 
patter ' ' or the ' ' progressive ' ' ? What is w " progressive ' ' ? 

2. Why has America in the past been relatively free from "radical 
expressions" of dissatisfaction with things as they are? Is this 
immunity destined to be permanent ? 

3. Compare the conditions and institutions at which protest is 
directed in non-industrial and industrial societies ? Against what con- 
ditions and institutions do modern reformers most vigorously protest ? 

4. "The voice of protest is short-sighted and emotional. It is 
the cry of those without imagination and power of abstraction suffi- 
cient to enable them to take a comprehensive and long-time view of 
things." Do you agree ? 

5. What "Utopias" have you read? Were they descriptions of 
ideal societies or protests against the schemes of institutional arrange- 
ments under which they were written ? In what social Utopia would 
you like to live ? 

91. Individualistic Schemes of Reform 

A. The schemes of reform presented in this section have a 
double value as an introduction to socialism. By contrast their 
"individualistic" nature reveals the "socialistic" basis of the other 
system. Further, they reveal institutions, the object of which is to 
give the industrial laborer a fixed status in the scheme of things 

96 



COMPREHENSIVE SCHEMES OF SOCIAL REFORM 97 

industrial, and which accordingly find places in the socialistic 
program. 

B. 251, 305, 306, 323, 333. 

C. I. If the laborers are "scrub-humanity," is it desirable to 
better their conditions ? Is it possible ? 2. Can co-operation furnish 
a solution of the labor problem ? 3. Is profit-sharing a way to indus- 
trial peace ? 4. Is the difference between the two \dews of the welfare 
of the laborers in the steel industry due to a difference in facts, in 
prejudices, or to something else? 5. Are old-age pensions advanta- 
geous to the employers ? the employees immediately affected ? em- 
ployees in general ? the public ? 

D. I . " Poverty is the wage of inertia." " Blessed are the poor," 
Reconcile these two statements. 

2. "I have solved the labor problem so far as my own factory is 
concerned. I pay my men a little higher wages and maintain a little 
better working conditions than do others in my industry. Anyone 
else can solve his problem by following my simple remedy." Can 
the problem be solved if all employers go and do likewise ? 

3. "The whole of the present social unrest has its root in a lack 
of identity between the interests of labor and those of capital. It 
will disappear straightway, once that identity is established. To this 
end only the simple device of profit-sharing is needed." Is the 
problem to be solved so easily? 

4. "Profit-sharing solves the labor problem by giving the em- 
ployee an interest in the business." "Profit-sharing is an attempt to 
bribe the laborer to accept the employer's viewpoint, philosophy, and 
social program." Which statement is true ? 

5. "Devices such as welfare work, sickness benefits, and old-age 
pensions represent an attempt to force 'the higher efficiency' upon 
the laborer. They represent attempts to 'do things for him,' rather 
than to allow him to work out his own salvation. They proceed 
from assumptions of superiority and inferiority in society and of the 
duty of the superior to be good to the inferior." Develop this argu- 
ment. Account for its prevalence among laborers. Is it an adequate 
argument against "individualistic" schemes of reform? 

6. Make a list of the institutions mentioned in these individualistic 
schemes of which use would be made by a socialistic state, and show 
the use which socialism would make of each of them. 



92. The Socialist's Indictment of Capitalism 



/ 



A. Thus far socialism has presented a negative rather than a 
positive doctrine. Its concern has been much more with pointing 
out defects in contemporary social arrangements than with elaborating 



98 CURRENT ECONOMIC PROBLEMS 

new arrangements. Its great services, in the development alike of 
economic science and industrial culture, have been critical rather 
than constructive. For this reason, if we would understand socialism 
aright, we must approach it as an economics of protest. 

B. 27, 52. 

C. I. State and criticize the theory of industrial evolution as' 
outlined by Marx. 2. Enumerate the particulars in which socialistic 
critics insist that "capitalism " has failed. Appraise their arguments. 
3. Is there any inconsistency between Marx's argument and that of 
Macdonald? 4. What contributions to economic science have been 
made by these indictments of the present order? 5. What social 
problems has this criticism either discovered or revealed more clearly ? 

D. I. "Capitalism is a mere phase of the evolution of society." 
Mention and briefly describe other "phases." Why do, or do you not, 
think that capitalism is the "final form" in economic development? 

2. "In the beginning the Lord created heaven and earth, but 
nowhere on the landscape was there a particle of capital. Then the 
Lord created man; still there was no capital. Then man began to 
labor, and lo! there was capital, created oy the labor of the man." 
Does this argument succe^ in annihilating capital as a factor of 
production ? 

3. "The capitalistic system has succeeded admirably in solving 
the problem of production. Under its whips and in search of its 
prizes material wealth has been increased a hundred fold." Elaborate 
this argument. Its implication is that it has left what problem 
unsolved ? 

4. "Capitalism lays its own cuckoo egg in the nest." "Because 
of its iniquities we should see to it that the capitalistic system is 
replaced by one better able to meet human needs." Are these two 
arguments consistent? 

5. Socialism is usually defined in terms of a constructive scheme 
for the reconstruction of society. Does this disprove the statement 
above, that socialist doctrine is negative rather than positive, critical 
rather than constructive ? 

6. Mention various ways in which socialism has contributed or 
is likely to contribute to the development of economic science; of 
industrial culture. Does an admission of the value of its contributions 
indicate an adherence to its doctrines ? 

93. The Case for Socialism 

A. The case for socialism is quite largely the case against capi- 
talism. But, by implication, it suggests, at least in very large outlines, 
a general theory for a program of reconstruction. 



COMPREHENSIVE SCHEMES OF SOCIAL REFORM 99 

C. I. Distinguish between socialism, communism, and anarch- 
ism. 2. What general principles underlie the proposal of a social 
commonwealth? 3. What institutions of capitalism would be re- 
tained in the sociahstic state ? 4. Is there a clear antithesis between 
the socialistic and the capitalistic forms of industrial organization? 
5. Is socialism to be condemned because its plan of social reconstruc- 
tion is not worked out in its details ? 

D. I. Why did the spirit of social protest take an anarchistic 
form in the England of the eighteenth century ? Why does it take a 
socialistic form in modern England ? Why does it take an anarchistic 
form in Russia and a socialistic form in Germany ? 

2. "Socialism is based fundamentally upon the same economic 
philosophy as capitalism. Socialism would keep the capitalistic 
structure of society intact. It would change only the equities in the 
ownership of property." Defend or attack this statement. 

3. "The central aim of socialism is to terminate the divorce of 
the workers from the natural sources of subsistence and of culture." 
Is this a correct statement of the aim of socialism ? If the state be 
substituted for the private owner, will the sources of "subsistence 
and culture" be any more accessible to the workers ? If the divorce 
can be terminated, its termination involves what changes in our 
institutional arrangements ? 

4. Why is it that socialism is usually thought of as a proposal for 
economic reconstruction ? why not political, religious, social, or even 
cultural reconstruction? 

5. Would "personal liberty" have the content in a sociahstic 
society which it now has ? Would there be more or less of it ? If its 
content is different, how can you tell whether there would be more 
or less ? 

6. Which of the following institutions would reappear under 
socialism: the market? private property? contract? pecuniary 
valuation ? competition ? the wages system ? capital ? interest ? 
rent? the entrepreneur? the corporation? the state? economic 
classes ? 

94. Socialist Arguments for the Masses 

A. Socialist writers and orators are much too clever to present 
to the masses a dispassionate and scientifically accurate recital of 
the comparative merits and defects of capitalism and sociahsm. 
They reahze quite clearly that an emotional appeal is necessary to 
make converts. We must not forget that the real sociahsm of a 
majority of its devotees is not the "socialism of analysis" but the 
"socialism of propaganda." 

B. 27,283,312,322,354,355. 



lOO CURRENT ECONOMIC PROBLEMS 

C. I. Make a tabular outline of the charges brought against 
capitalism in these readings. 2. Explain the presence and increasing 
prevalence of these views. 3. Of what value is a knowledge of these 
"arguments" to the student of economics? 4. Of what value is a 
knowledge of economics to the exponent of socialism. 

D. I, "All over this land workers are producing food, clothing, 
and luxuries that others consume; they are building houses that 
others live in; they are constructing railroads that others travel over. 
When socialism arrives, all this will be changed. The workers will 
consume the food, clothes, and luxuries they produce; they will Uve 
in the houses they build; and they will travel over the railroads they 
construct." Account for this argument. Appraise it. 

2. "All value is produced by labor." "Socialism offers you $1,800 
a year for your vote." Show how the figure $1,800 is arrived at. Can 
socialism redeem this promise ? 

3. "A laborer, working in a good factory with up-to-date equip- 
ment, can produce $10 of goods in a day. But he gets only $2. Some- 
body else gets $8. Under socialism the $10 would go to the laborer 
who produced it." Admitting the last statement, would all of it go 
to the laborer working in the factory ? Should all of it go to "labor " ? 

4. "Since there is just so much work to be done, labor-saving 
machinery robs men of jobs. It is, therefore, the deadliest curse 
which has fallen upon the human race." Cite similar evidence of the 
opposition of laborers to the introduction of machinery. What 
theory lies back of this opposition ? Appraise the theory. 

95. Socialist Programs 

A. Socialism is a protest and an ideal, but it is a program for 
immediate action as well. A study of socialist party platforms in 
historical order reveals clearly the increasingly conservative character 
of the movement. Something of its present conservatism can be seen 
in a study of a single party platform. 

C. I. Make a tabular list of the assumptions upon which is 
based the theory that finds expression in the specific demands of 
socialist platforms. 2 . Give an exposition of the " theory of socialism " 
so far as it is developed in these platforms. 3. Make a list of the 
"demands" which would be acceptable to large bodies of men who 
do not call themselves socialists. 4. What have you left? Is this 
residuum the test of socialism ? 

D. I. "As any movement grows older, the number of its ad- 
herents increases, and it becomes better known, unconsciously it loses 
little by little its radical character and becomes conservative." Can 
this statement be made to serve as the basis for a history of Chris- 



COMPREHENSIVE SCHEMES OF SOCIAL REFORM loi 

tianity ? Is it applicable to the socialist movement ? Can you give 
other illustrations of it? 

2 . " All values are produced by labor. " "All productive property 
should belong to society." "All initiative in industry should be taken 
by the state." Cite evidence in the "platforms" showing that 
socialists do, or do not, believe in these "principles" today. 

3. What arguments support the theory that socialism is to be 
achieved by means of a revolution ? that it is to come through evolu- 
tion? Do you expect to find "evolutionary" and "revolutionary" 
socialists agreed on a program ? Do the platforms given represent 
the demands of the evolutionists or of the revolutionists ? 

4. Would rent be paid in a socialistic state ? Would its recipient 
ever be a private individual ? Would interest be paid ? If so, who 
would receive it? By what standards would a socialistic state 
determine rates of wages ? 

5. "To each according to his personal productive contribution." 
Is this ideal of "distributive justice" definite and intelligible ? Show 
just how in practice it would be applied. 

96. The Case against Socialism 

A. There is little exaggeration in saying that socialism means 
many things to many men. Therefore, in advancing arguments 
against it, or in studying the arguments of others, one must be 
exceedingly careful to correlate the attack with the particular kind 
of socialism which is attacked. 

B. 61, 67, 278, 325. 

C. I. Sketch a plan by which the transition to the socialist 
state may be effected with the minimum of loss. 2. Will socialism 
rid society of inequality ? Will it reduce inequality and rid it of the 
extremes so evident under the present system? 3. Will socialism 
endanger "personal liberty"? 4. What validity is there in the 
argument that socialism will cause a rapid increase in population? 
that it will discourage thrift? 

D. I. " Under individualism the scheme of prices is the guide to 
production. It effectively regulates its nature and quantity. For 
this device socialism would substitute the caprice of department 
heads. The result would be a great loss in efficiency." Examine 
carefully this argument. 

2*. "Under sociaHsm a higher value would be placed upon the 
mediocre man. But a socialistic state might be expected to fail to 
single out for important work men of real genius, to give them oppor- 
tunities for their work, and to reward them properly. The result of 



I02 CURRENT ECONOMIC PROBLEMS 

this failure would be a permanent loss to the whole of society." Argue 
for or against this conclusion. 

3. "The contrast between inefficiency in politics under public 
management and efficiency in business under private management is 
the contrast between the inefficiency of socialism and the efficiency 
of individualism." Is the contrast a true one ? 

4. "The immediate gains to the masses through socialism would 
be more than offset by the ultimate losses which the system, when 
once thoroughly established, would bring about." State and appraise 
this argument. 

5. "The gains which socialism would effect in the more equitable 
distribution of wealth would be more than offset by the losses in 
productive efficiency which it would entail." Do you agree? 

6. "Socialism is coming, not by conscious choice, but by the 
cumulative action of a large number of seemingly isolated tendencies. 
Evidence of this is to be found in our almost complete regulation of the 
railways, in increased supervision over corporations and capitalistic 
monopolies, in the conservation of natural resources through public 
action, in the regulation of immigration and of population, in the 
measures being taken for the elimination of economic insecurity, etc." 
Cite the evidence furnished by the preceding study of tendencies 
toward an enlargement of social, at the expense of individual, rights. 
Does this evidence confirm the statement that socialism is coming ? 
are the tendencies enumerated bound to continue and to grow ? 

7. "After all, the real question is not whether one is an individual- 
ist or a socialist, but how much of an individualist and how much of a 
socialist he is." What do you think of this way of putting it ? 

97. Social Panaceas 

A. The multifarious and bewildering character of our industrial 
society and the interdependence and complexity of its problems has 
been insisted upon all through our study. At its close it can perhaps 
be emphasized in no better way than by presenting a number of 
panaceas, each the work of a "practical" man, and each based upon 
the conception that our industrial system is a simple and easily 
managed one. 

C. I. Account for the prevalence of panaceas for economic and 
social ills. 2. State the theory implicit in. each of the proposals given, 
determine its assumptions, and criticize them. 3. Of what value is a 
study of social panaceas ? . 

D. I. Why is it such a common habit to explain things in terms 
of a single cause ? Are there problems in which such an explanation 
is valuable ? Is such an explanation valuable in a consideration of 
"current economic problems"? 



COMPREHENSIVE SCHEMES OF SOCIAL REFORM 103 

2. "The opinions of the business man on fundamental economic 
problems are generally unsound; for he, like others, has a habit of 
generaUzing from his own particular business and applying his con- 
clusions to industrial society as a whole. Since their application is 
to a situation far larger and more complex than the range of his 
observation and experience, they are almost certainly invalid." 
Explain in detail. 

3. "The business man's concern is with an individual business; 
that of the political executive or legislator with industrial society as 
an entity. They are dealing with problems different in subject- 
matter, in method of approach, and in remedial proposals." Explain. 
Does this imply that an executive has no use for knowledge of busi- 
ness ? that there is no place for the business man in politics ? What 
does it imply ? 

4. Why is there such a disposition, particularly in America, for 
every man to be his own political economist ? Is this disposition on 
the increase or the decrease? Is this disposition in any way to be 
connected with the prevalence of panaceas ? 

5. "Popular belief in social panaceas is responsible for an anti- 
intellectual attitude toward current problems. It prohibits the 
careful consideration, the painstaking analysis, and the deliberate 
formulation of programs necessary to deal with them intelligently. 
It indicates that, so far as economics is concerned, the public is still 
living in an age of superstition." Explain this argument. What is 
it worth ? 

6. Is the prevalence of panaceas due to a conception of society 
in static and mechanical terms ? If the "evolutionary," or "organic," 
viewpoint should become dominant in the popular mind, would 
panaceas lose their hold ? 

98. Economics and the Future of Society 

A. If the course of study, which is just drawing to a close, bears 
any meaning at all, it is that our current problems are slowly develop- 
ing affairs, that they are intimately associated with each other and 
with the developing society of which they are aspects, that they tran- 
scend the mere economic side of life, and that their "solutions" are 
to be sought in a comprehensive, long-time, and ever-developing 
program. For a very tentative statement of the ends, agencies, and 
proposals constituting such a program the student is now ready. 
The very shortcomings of his attempt should show him quite clearly 
his particular lack in factual knowledge, economic principles, general 
social theory, and a philosophy of life. It should mark, not an end, 
but^a_new beginning of study. 



I04 CURRENT ECONOMIC PROBLEMS 

B. General Introduction, Introduction to XIV. 

C. I. What factors require that economic problems remain 
always with us? 2. Give examples of some of the more immediate 
and obvious agencies that can be used in a solution of current prob- 
lems; of some of the more immediate and obvious things which can 
be done. 3. Illustrate the part which literature and art are likely 
to play in social and economic reform. 4. Can a program aiming at 
less rather than more immediate good be put through in a democracy ? 
in a system dominated by the pecuniary calculus ? 

D. I. "The limited amount of our natural resources, the lack 
of identity between the interests of social groups, and an antithesis 
between present and future values guarantee to society economic 
problems for all time to come." Explain. Does this argument imply 
that economic problems are equally acute in all ages ? 

2. "Modern industrial culture can be characterized by the three 
adjectives, industrial, pecuniary, and urban." Show that each of 
these implies the other two. Show, by clear-cut examples, how the 
nature of economic problems has been affected by the character of 
our social system. Show that our problems are quite different from 
what they were in the earlier stages of industrialism. 

3. "Current problems are not affairs of the moment. Their 
temporary forms are mere passing aspects of larger and more com- 
plicated problems. For their beginnings we must look into the far- 
distant past. They are in process of gradual solution. Each involves 
something of almost every phase of our complicated social life," By 

.taking as an example some one of the problems we have discussed, 
illustrate each of these statements. 

4. "No current economic problem can be properly understood if 
it be studied in isolation." Illustrate from the topics discussed. 
Can economics be properly understood by one who knows nothing of 
history ? of political science ? of philosophy ? Show the contribu- 
tion which each of these subjects makes to an understanding of 
economics. 

5. "A solution of an economic problem cannot be found by a 
calculation of the utilities and disutilities likely to follow alternative 
proposals. Every proposal involves a distribution of costs and 
utilities between the present and the future, and between different 
classes. The consequences of every proposal are to be found in every 
aspect of life, economic, political, religious, social. There is no magic 
instrument of measurement which can unlock such a riddle." Illus- 
trate by reference to the alternative proposals for solving some of the 
problems discussed above. 

6. "It may be that somehow or other problems get 'solved'; it 
may be that they merely become obsolescent and, like old machinery, 



COMPREHENSIVE SCHEMES OF SOCIAL REFORM 105 

are 'scrapped'; it may be that they are forced to surrender their 
places to newcomers ; or it may be that they tend to lose their identi- 
ties in those of other and larger problems." By concrete illustration 
show how problems have been "solved" in each of these ways. 

7. " It is usually much more accurate to speak of the development, 
rather than of the solution, of economic problems." Explain, say, 
by showing how, time after time, the problem of the public and the 
railroads has been solved. 

8. "The solution of an economic problem involves a succession 
of choices between conflicting and incommensurable values." Explain 
in detail with illustrations. Does this statement, if true, encourage or 
discourage the attempt to deal with problems in isolation ? 

9. "Both the very existence and the solution of problems depends 
upon contemporary social philosophy." Explain and illustrate. 

10. Reduce the problems which have been discussed in this 
course to the smallest number possible. Is there any unity among 
the few that you have left ? Can they all be reduced to a single 
problem ? 

11. Forrnulate, in as great detail as necessary, a comprehensive 
and consistent program covering all the problems which have been 
discussed in this course. Begin with a statement of the general 
theory of the ends you wish to accompHsh, the agencies you wish to 
employ, and the methods you wish to use. Follow this with a clear- 
cut statement of your several proposals, being sure that they are 
properly classified. 

12. Make a careful criticism of the tentative program which you 
have formulated. Enumerate the points upon which you are not 
sure of the facts, of economic principles, of general social theory, of 
your philosophy of life. What further studies in economics and in 
the humanistic sciences does it appear that you should make ? What 
seems to you to be your next task ? 



